GLOBAL MARKETS-Wall Street surges, yields slide for second day as investors eye weaker economic data

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Investors are starting to think about the central bank’s pivot on interest rates

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Dollar falls on the fifth day

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Gold hits 3-week high

By Peter Schroeder

WASHINGTON, Oct 4 (Reuters) – US stocks and oil extended a comeback to a second straight day, while US Treasury yields slid on hopes global central banks’ efforts to fight inflation are easing going forward could.

A new report showing a fall in US job vacancies, a weaker read of US manufacturing data and a lower-than-expected rate hike by Australia’s central bank all contributed to investor speculation that a central bank switch to reduced rate hikes could be imminent.

That sentiment helped propel Wall Street higher on Tuesday, with the Dow Jones Industrial Average up 2.49%, the S&P 500 up 2.74% and the Nasdaq Composite up 3%.

The MSCI world stock index, which reflects stocks from 45 nations, recently rose by 3.1%.

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Global bond yields fell, with benchmark 10-year Treasury yields falling to 3.609%. The yield fell nearly 20 basis points on Monday after topping 4.0% just last week.

WORK SLOWDOWN?

On Tuesday, the US Department of Labor reported that August job vacancies fell by the most in nearly 2-1/2 years, suggesting the job market may cool if higher interest rates take hold.

For every unemployed person there were 1.7 job offers in August, compared to two in July. But the number of layoffs remained low, a sign of a still tight labor market that could keep the Federal Reserve on its aggressive monetary tightening path as Fed officials insist they still need to do more to contain inflation.

“We do not expect any change in the Fed’s likely actions at the next meeting. In our view, the job market has moved from ‘extremely tight’ to just ‘very tight’ and the Fed is likely to respond with another 0.75% hike in the fed funds rate next month,” said Jeffrey Roach, LPL Financial’s chief economist .

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Still, the weaker economic data built on a weaker-than-expected US manufacturing report on Monday and a lower rate hike from Australia, where the Reserve Bank of Australia surprised markets with a lower-than-expected rate hike, raising hopes that other central banks will follow suit could .

“Today’s RBA decision will clearly fuel speculation that other central banks will start to slow the pace of rate hikes,” analysts at TD Securities said in a statement.

Investors will look to Friday’s monthly US jobs report as key data showing whether rate hikes have started to take an economic toll.

Amid falling Treasury yields, the dollar was on track for a fifth consecutive day’s decline against a basket of currencies — its longest streak of declines since August 2021 — as investors began to price in the possibility of tighter credit conditions driving the Federal Reserve harder become carefully. The index was last down 1.38% to 110.207.

Also Read :  Dollar slides as lower U.S. yields give markets a breather

Markets are showing that investors believe inflation is likely to fall at a faster rate. On a five-year horizon, investors expect inflation to be just 2.33%, down from just under 3% six weeks ago.

Oil prices continued their upward trend amid the prospect of production cuts from the world’s largest exporters. Brent crude was last up 2.84% to $91.41 a barrel, while US crude was up 2.93% to $86.10 a barrel.

The dollar’s slide also helped boost gold, with spot gold prices rising 1.48% to $1,725.59 an ounce.

(Additional reporting by Tom Westbrook in Sydney; Editing by David Evans, Mark Potter, Ed Osmond and Mark Heinrich)

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