Wall Street's record week heightens expectations for US interest rate cuts

Inflation data also boosted hopes some level of confidence has returned to Federal Reserve officials

The Dow Jones Industrial Average closed above the 40,000 mark for the first time on Friday, after breaching it for the first time on Thursday. EPA

Global stock markets ended the week mixed, but Wall Street's record run anchored by the Dow Jones Industrial Average boosted bets that the US Federal Reserve will finally cut interest rates this year.

The Dow closed above the 40,000 mark for the first time on Friday, after breaching it for the first time on Thursday, as inflation data boosted hopes that US interest rates will go down in 2024.

The US Labour Department on Wednesday reported that Consumer Price Index inflation in April rose 3.4 per cent on an annual basis, leading economists to believe that it should return some level of confidence for Fed officials.

While still well above the Fed's long-term 2 per cent goal, Fed members insisted that the rate policy “is in a good place right now and that it will probably take longer for inflation to slow to the 2 per cent target”, Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note.

However, the recent hotter-than-expected inflation data is strengthening the argument for the Fed to be cautious in determining when to dial back interest rates, a representative for the International Monetary Fund cautioned on Thursday.

Also, separate reports released on Thursday underscored the Fed's bumpy path, as jobless claims for the week ending May 11 fell by 10,000 in a sign of a cooling labour market, while import prices jumped 0.9 per cent last month, the largest increase in more than two years.

The central bank's Federal Open Market Committee is scheduled to meet on June 11 and 12.

“Despite the Fed members’ cautious approach, the Fed said earlier this month that its next move is probably not a rate hike. Inflation is nowhere close to the levels where the Fed could reasonably and publicly hint at an upcoming rate cut,” Ms Ozkardeskaya said.

On Wall Street, the Dow added 0.34 per cent and the S&P 500 rose 0.12 per cent, to post weekly gains for the fifth and fourth straight week, respectively. The Nasdaq Composite, however, gave up 0.07 per cent, but was still up for a fourth week.

Year-to-date, the Dow, S&P 500 and Nasdaq are up 1.2 per cent, 1.5 per cent and 2.1 per cent, respectively.

In Europe, major stock indices settled lower, with London's FTSE 100 shedding 0.2 per cent to snap three weeks of gains, led by declines in personal goods and car parts.

The blue-chip index hit a fresh record high on Wednesday ahead of the US inflation report.

Elsewhere on the continent, Paris's CAC 40 retreated 0.3 per cent and Frankfurt's DAX lost 0.2 per cent.

Earlier in Asia, markets in Hong Kong and Shanghai rallied after China introduced new measures to bolster the struggling property sector in the world's second-largest economy.

The “heavyweight policies”, as described by the housing ministry-run China Real Estate Newspaper, marked “a significant historic moment” for the crisis-hit industry, and involves an extra 1 trillion yuan ($138 billion) funding from the central bank and eased mortgage rules, among others.

Hong Kong's Hang Seng index rose 0.9 per cent, while the Shanghai Composite climbed 1 per cent. Tokyo's Nikkei 225, meanwhile, declined 0.3 per cent.

In commodities, oil prices settled higher on Friday and notched a weekly gain amid an improved demand outlook in the US and China.

Brent edged higher by 0.85 per cent, to settle at $83.98 a barrel, while West Texas Intermediate added 1 per cent to close at $80.06 a barrel.

Gold, meanwhile, rose 1.33 per cent to settle at $2,417.40 per ounce, for a third straight weekly gain, boosted by China's real estate measures and US interest rate cut hopes.

The precious metal, a hedge against inflation, hit a record high of $2,431.29 on April 12 and has found decent support around the $2,300 level, analysts have told The National.