Stocks surge to record highs as dollar slips before Fed decision

Global Markets Reach New Heights Amid Anticipation of Fed Rate Cuts

Global financial markets experienced a surge, reaching record highs as investors anticipated the U.S. Federal Reserve’s potential decision to begin easing its monetary policy. This optimism was reflected in both equity indices and commodity prices, particularly gold, which saw an all-time high due to a weakening U.S. dollar.

The MSCI All-Country World Index climbed to 977.09, marking a 0.50% increase and surpassing last week’s previous record. On Wall Street, major indices such as the S&P 500 and Nasdaq closed higher, with the Nasdaq hitting an intraday record high. The Dow Jones Industrial Average also rose slightly, closing at 45,883.45, while the S&P 500 gained 0.47% to reach 6,615.28.

In Europe, stock markets advanced by 0.42%, nearing a three-week high. Luxury and defense stocks were among the top performers, contributing to the positive momentum. Analysts noted that the market remains in a wait-and-see mode ahead of the Fed's upcoming announcement.

Wasif Latif, chief investment officer at Sarmaya Partners, highlighted that the market has been on a steady upward trend, driven by expectations of a rate cut. He emphasized the importance of the Fed’s "dot plot" projections and guidance from Chair Jerome Powell regarding future rate adjustments. The yield on the benchmark U.S. 10-year note dropped to 4.036%, reflecting growing anticipation for a more accommodative monetary policy.

Futures contracts already priced in 125 basis points of cuts by late 2026, suggesting that any less-than-dovish stance from the Fed could disappoint investors. Latif added that the market is closely watching whether the rate announcement will lead to a sell-off or if the news will be absorbed without significant volatility.

Meanwhile, U.S. President Donald Trump continued his criticism of the central bank, accusing Fed Chair Jerome Powell of being incompetent and harming the housing market. The Bank of Canada is also expected to cut rates this week, while the Bank of Japan and the Bank of England are likely to keep their rates unchanged.

In the currency markets, the U.S. dollar weakened against major currencies ahead of the Fed’s expected rate cut. It fell 0.17% against the Japanese yen and 0.27% against the Swiss franc. The dollar index declined by 0.36% to 97.31, signaling broader market confidence in a shift toward easier monetary policy.

The euro remained resilient despite Fitch’s downgrade of France, rising 0.23% against the U.S. dollar. However, it showed slight weakness against the British pound, trading at 86.44 pence. The European Central Bank (ECB) signaled a stable outlook for its monetary policy, with officials like Christine Lagarde set to speak this week.

On the geopolitical front, the United States and China reached a framework agreement to transfer ownership of TikTok to U.S.-controlled entities. This arrangement is expected to be confirmed during a call between U.S. President Donald Trump and Chinese President Xi Jinping.

Nvidia faced challenges after China’s market regulator announced that a preliminary investigation found the company had violated anti-monopoly laws. This development marked another setback for the U.S. chip giant.

Oil prices increased as investors evaluated the impact of Ukrainian drone attacks on Russian refineries. Brent crude futures rose 0.67% to $67.44 per barrel, while U.S. West Texas Intermediate crude settled at $63.30, up 0.97%.

Gold prices hit a new record high, driven by a weaker dollar and lower Treasury yields. Spot gold increased by 1.04% to $3,680.87 per ounce, with earlier intraday levels reaching $3,685.39.