Key points:

  • Global stock indices hit new record highs thanks to gains in technology stocks.
  • Sterling rose after UK inflation fell to 2%, matching the Bank of England’s target.
  • Weak retail sales data slightly raised expectations for a Fed rate cut in September.

Global stock indexes hit new highs on Wednesday, fueled by a rally in the technology sector. Chip maker Nvidia’s shares have soared, making the company the world’s most valuable by market capitalization. At the same time, the US dollar showed sluggish performance amid weak US retail sales data, which increased expectations of lower interest rates this year.

The MSCI All-World index, which tracks stocks around the world, rose 0.2% to a record high of 805.13.

The tech sector pushes indices up

The overnight rally in technology stocks on Wall Street, which saw Nvidia overtake Microsoft in market capitalization, continued into Asian trading hours. The regional index of technology stocks (.MIAPJIT00NUS) jumped 2% to hit a new record high.

The optimism reigning in American markets was reflected in futures. Futures for the tech-heavy Nasdaq 100 index rose 0.2% and futures for the S&P 500 index rose 0.1%.

In Europe, the STOXX 600 index (.STOXX) opened unchanged, maintaining neutral dynamics.

British pound strengthens

Sterling rose after it became known that annual inflation in the UK fell to 2% in May, matching the Bank of England’s target for the first time since 2021.

This fall in inflation will be positive news for both Prime Minister Rishi Sunak and the Bank of England. However, it may come too late to influence the outcome of next month’s election or prompt the Bank of England to cut interest rates at its meeting on Thursday.

It’s worth noting that the UK’s 2% inflation rate is still lower than the US’s PCE of 2.7%.Sterling, which has fallen about 0.2% this month, is currently trading at $1.2722, up 0.1%.

The euro, on the other hand, remains virtually unchanged at $1.073, but is down 1% in June. The weakening of the single currency comes as French President Emmanuel Macron calls for early elections after his ruling center party was defeated by far-right forces in European Parliament elections.

Hopes for interest rate reduction

U.S. retail sales showed weak growth in May, with the previous month’s figures slightly adjusted downward, data released Tuesday showed. The data suggests that economic activity remained sluggish in the second quarter.

Weak retail sales data slightly raised expectations for a Fed rate cut in September. Traders estimate the probability of such a scenario at 67%, which is higher than 61% predicted the day before. Markets are pricing in a 48 basis point rate cut by the end of this year.

Last week’s tepid U.S. inflation reading contrasted with a tougher stance from Fed officials, who cut their average forecast for rate cuts this year from three-quarters of a point to one.

Fed officials are waiting for further evidence of slowing inflation, as well as signals from a still strong labor market, before making a final decision on rate cuts, which most analysts expect by the end of this year or in 2025.

The dollar index, which reflects the performance of the American currency against six others, was in the positive zone, trading at 105.30.

The Japanese yen strengthened slightly, sending the US dollar down 0.1% to 157.70, close to the six-week high hit last week. It’s worth noting that over the past 4.5 years, the yen has lost a third of its value against the dollar, mainly due to the large gap between interest rates in Japan and the United States.