Global Equities Surge to New Highs on Inflation Easing and Rate Cut Optimism
Global stock markets have been rallying robustly, driven by easing inflationary pressures, strong corporate earnings, and growing expectations for Federal Reserve interest rate cuts. The MSCI All Country World Index, which tracks over 2,500 stocks across developed and emerging markets, has recorded fresh all-time highs for four consecutive sessions, according to data from LSEG.
In the United States, the S&P 500 closed at a record high for the second consecutive day on Wednesday. Meanwhile, key Asian benchmarks including Japan’s Nikkei 225, South Korea’s Kospi, and Singapore’s Straits Times Index have also reached historic peaks this week.
Improved Sentiment Amid Economic Resilience
The rally reflects a significant shift in market sentiment compared to earlier this year, when concerns over persistent inflation, geopolitical tensions, and U.S. tariffs weighed heavily on growth prospects. “Markets have been a bit more resilient than what we’ve been expecting,” said Eddy Loh, head of investment strategy at Maybank. He noted that the year-to-date gains largely stem from robust economic growth and strong corporate earnings across major economies, including the U.S., Europe, Japan, and key Asian markets outside Japan.
Recent U.S. economic data have signaled some labor market softness, further lifting investor optimism. Notably, the U.S. producer price index (PPI) unexpectedly declined by 0.1% in August, contrasting with forecasts of a 0.3% increase. This downward surprise has strengthened the case for Federal Reserve policy easing.
Fed Rate Cut Expectations Drive Market Momentum
José Torres, senior economist at Interactive Brokers, emphasized that the weaker-than-expected PPI reading suggests deflationary pressures rather than inflation, which has invigorated “animal spirits” among investors. Market pricing reflects a nearly 92% probability of a 25-basis-point rate cut at the Federal Reserve’s upcoming September 17 meeting, according to CME Group’s FedWatch tool.
Maybank’s Loh projects two rate cuts this year, with the September reduction largely anticipated. Marvin Loh, senior global macro strategist at State Street, highlighted that the potential restart of the Fed’s easing cycle amid a solid economic backdrop is encouraging for risk assets. Investors are also reallocating capital toward equities due to ongoing uncertainty about the trajectory of long-term interest rates.
Tech Sector Strength Bolsters Rally
The technology sector’s momentum has been further amplified by Oracle’s impressive AI-related revenue forecast. Oracle’s shares surged to an all-time high, achieving their best single-day gain since 1992 and adding $244 billion in market capitalization to reach $922 billion. This performance underscores investor confidence in a tech-driven market rally.
Looking Ahead: CPI Data and Tariff Impacts
Investors are closely monitoring the forthcoming U.S. consumer price index (CPI) release. Torres noted that a lower-than-expected CPI reading, combined with recent payroll revisions and the soft PPI data, could strengthen the case for more aggressive Fed rate cuts, potentially pushing stocks to new highs.
However, caution remains. Eddy Loh warned that the effects of recently implemented U.S. tariffs, which took effect in August, might become more apparent in the coming months and could dampen investor sentiment.
FinOracleAI — Market View
The current global equity uptrend is primarily driven by easing inflationary pressures, solid corporate earnings, and strong expectations of Federal Reserve rate cuts. Positive surprises in U.S. inflation data have bolstered the probability of policy easing, uplifting investor risk appetite. However, the potential impact of newly imposed U.S. tariffs and upcoming CPI data introduces uncertainty that could temper gains.
Impact: positive
