By Lawrence Delevingne and Huw Jones
(Reuters) -Global shares idled on Wednesday after a lengthy rebound propelled them towards recent record highs, and as investors awaited clues on interest-rate cuts from the Federal Reserve on Friday to decide their next move.
Oil was steady after a run of declines driven by expectations of reduced Chinese demand, while dollar weakness on the prospect of rate cuts kept gold near Tuesday’s record high.
On Wall Street, the Dow Jones Industrial Average rose 0.03%, to 40,847.85, the S&P 500 gained 0.28%, to 5,612.60 and the Nasdaq Composite gained 0.34%, to 17,877.54.
The MSCI All Country index for global stocks was little changed, still near its mid-July record high and up 13.5% for the year.
In Europe, the STOXX index of 600 companies was up 0.27%, nearing its all-time high reached on June 7.
Stocks have been on a roller-coaster ride this month after investors took fright following U.S. jobs data that raised the prospect of recession in the world’s biggest economy.
Those worries have given way to bets on a soft landing cushioned by cuts in U.S. borrowing costs expected to start in September.
U.S. employers added far fewer jobs than originally reported in the year through March, the Labor Department said on Wednesday, underscoring the growing concerns the Federal Reserve has about the health of the labor market as it gears up to start cutting interest rates in September.
Fed meeting minutes are also expected later on Wednesday to reinforce a dovish stance ahead of a speech from the central bank’s chair Jerome Powell on Friday.
“We expect the Fed chairman to continue to signal that a first rate cut is on the cards for September. Yet there is a chance that investors could be disappointed by the comments, if there are any references to the stickiness of inflation,” said Guy Stear, head of developed markets strategy at Amundi Investment Institute.
Interest-rate futures have fully priced in a 25-basis-point U.S. rate cut next month, with a one-in-three chance of a 50-bps cut. Almost 100 bps in cuts are priced in for this year, and another 100 bps next year.
A potentially unique situation beckons with material rate cuts without a recession, unlike the backdrop for cutting borrowing costs in five of the past seven cutting cycles, said Ross Yarrow, U.S. equities managing director at investment bank Baird.
“If we get a scenario where the Fed is cutting, inflation is falling and employment continues to rise, it really does start to look like a Goldilocks scenario,” Yarrow said.
“So I think the rebound in equities and their prospects from here are actually pretty good,” Yarrow said.
Markets may still be constrained, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
“We see markets are range-bound until after the November (U.S.) elections,” Samana wrote in an email.
STOCKS SLIDE IN ASIA
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.34%.
Hong Kong’s Hang Seng slid 0.7% with JD.com dropping 8.7% as top shareholder Walmart moved to sell its large stake.
Japan’s Nikkei fell 0.3% as a recovery from its collapse in early August runs into resistance around the 38,000 level.
The falling dollar has spurred gold to record highs and returned the yen to 145.75 per dollar following last month’s 38-year trough.
The euro is also up nearly 3% for August to date and, at $1.112, is at its highest since early December. [FRX/]
The mood kept bond markets supported and 10-year U.S. Treasury yields were little changed at 3.801%.
Oil prices were muted on Wednesday, holding ground after steady sell-offs. U.S. crude lost 0.11% to $73.09 a barrel and Brent rose to $77.25 per barrel, up 0.06% on the day.
Dalian iron ore prices climbed more than 4% after a Bloomberg report that China plans to allow local governments to buy unsold homes in the latest property-market support measure.
China is the world’s biggest steel consumer and markets are sensitive to any signs that construction there could revive.
Gold prices hovered around $2,500 an ounce, just below record levels touched on Tuesday.
(Reporting by Lawrence Delevingne in Boston and Huw Jones in London; additional reporting by Tom Westbrook in Singapore. Editing by Kim Coghill, Bernadette Baum, Christina Fincher, Barbara Lewis and Rod Nickel)
