On Monday, global shares achieved a new record high as investors positioned themselves for the U.S. Federal Reserve's monetary policy easing, anticipated to begin this week. The momentum in equity markets was further fueled by a decline in the U.S. dollar, which contributed to a surge in gold prices hitting unprecedented levels.
Traders are largely expecting the Federal Reserve to announce a 25 basis-point cut at the conclusion of its policy meeting on Wednesday, with the likelihood of this move approaching 100%, as indicated by CME's FedWatch tool. "Today, we seem to be in a wait-and-see mode ahead of the Fed meeting and the subsequent announcement," remarked Wasif Latif, chief investment officer at Sarmaya Partners in New Jersey. "The market has seen a considerable run-up, continuing to reach new highs in anticipation of the Fed's decision, and today appears to follow this trend."
Key components of the market included significant gains in the communication services, consumer discretionary, and technology sectors, while consumer staples, healthcare, and materials stocks experienced losses. Latif emphasized that the focus would also be on the Fed members' dot plot projections regarding interest rates, along with guidance from Fed Chair Jerome Powell about the pace and extent of further easing.
The yield on benchmark U.S. 10-year notes decreased by 2.4 basis points, settling at 4.036%. Futures markets have already priced in 125 basis points of rate cuts by late 2026, suggesting that anything less than a dovish stance from the Fed could lead to investor disappointment. "Interestingly, we've already witnessed substantial price movements in anticipation of the cut, raising the question of whether the rate announcement itself will trigger a sell-off today or not," Latif added.
In a related political development, U.S. President Donald Trump continued to criticize the central bank, labeling Powell as incompetent and claiming his actions were detrimental to the housing market. Furthermore, the Bank of Canada is also anticipated to reduce rates by a quarter point this week, while both the Bank of Japan and the Bank of England are expected to maintain their current rates.
In currency markets, the U.S. dollar depreciated against its counterparts in anticipation of the Fed's rate cut. The dollar fell by 0.17% to 147.42 against the Japanese yen and decreased 0.27% to 0.79420 against the Swiss franc. The dollar index also dropped by 0.36% to 97.31. Meanwhile, the euro managed to rise by 0.23% to $1.176075, despite Fitch's downgrade of France last week, while it traded slightly weaker against the British pound at 86.44 pence, down 0.1% for the day. The euro's strength is supported by a stable outlook for European Union rates, with the European Central Bank indicating a solid policy position last week.
In broader international relations, the United States and China reached a preliminary agreement to transition the short-video app TikTok to U.S.-controlled ownership. This arrangement is expected to be confirmed in an upcoming call between Trump and Chinese President Xi Jinping.
In the commodities market, oil prices experienced an uptick as investors evaluated the ramifications of Ukrainian drone attacks on Russian refineries. Brent crude futures rose by 0.67%, settling at $67.44 per barrel, while U.S. West Texas Intermediate crude increased by 0.97% to settle at $63.30 per barrel.
Gold prices soared to new record highs, driven by a weaker dollar and declining Treasury yields. Spot gold rose by 1.04% to $3,680.87 an ounce, even reaching a peak of $3,685.39 earlier in the session, marking a significant milestone in the precious metal's value.
Reporting by Chibuike Oguh in New York; Additional reporting by Wayne Cole and Stella Qiu; Editing by Christina Fincher, Will Dunham, Mark Potter, and Nick Zieminski.
