Global Markets: European and Asian Exchanges Follow Wall Street’s Rise

On Wall Street on Tuesday, the main stock indices rose, with the S&P 500 and Nasdaq reaching new record levels, as the inflation data in the U.S. for July supported expectations that the Fed will lower interest rates in September. The Dow Jones index rose by 483.52 points or 1.1 percent, to 44,458 points. At the same time, the S&P 500 index jumped 1.13 percent, to 6,446 points, and the Nasdaq by 1.39 percent, to 21,681 points.

The Department of Labor announced that inflation measured by consumer prices in July in the U.S. rose by 0.2 percent month-on-month and 2.7 percent year-on-year, while core inflation was 3.1 percent year-on-year. This is slightly below economists’ expectations. Yields on shorter-term Treasury bills, which reflect expectations related to interest rates, slid down on Tuesday. The market is highly confident that the Fed will lower interest rates by 0.25 percentage points in September. Lower interest rates encourage investments in stocks due to higher returns.

Among the significant news, investors were drawn to the announcement that Perplexity made a cash offer of $34.5 billion to acquire the Chrome browser. Shares of Alphabet, the owner of that browser, rose by 1.3 percent. Intel shares also increased by four percent after U.S. President Donald Trump said on Monday that he met with its CEO, Lip-Bu Tan, praising Tan and calling the meeting “very interesting.” Last week, Trump called for his resignation, labeling him ‘largely conflicted’ due to his ties with Chinese companies.

The quality of U.S. economic data remains a concern for investors, after Trump fired the head of the Bureau of Labor Statistics following the announcement of a decrease in non-farm payrolls in June and May. Markets are monitoring developments around Trump’s candidate, E.J. Antoni, for the head of that Bureau and potential candidates for the top position at the Fed.

– This is still an early stage of this process, and just when the Fed will begin to lower interest rates in the fall, inflation data will likely start reflecting some of these more direct tariff increases, complicating the decision to lower rates – said John Velis, macro strategist at BNY.

European and Asian Exchanges in the Positive

On European exchanges, most major indices finished trading in the positive on Tuesday. The pan-European Stoxx 600 strengthened by 0.21 percent, to 547.89 points. Meanwhile, the London FTSE index rose by 0.2 percent, to 9,147 points, and the Paris CAC by 0.71 percent, to 7,753 points, while the Frankfurt DAX weakened by 0.29 percent, to 24,024 points.

On Asian exchanges, stock prices rose on Wednesday, following gains on Wall Street after the inflation data supported expectations for a Fed rate cut in September, while the dollar’s exchange rate continued to weaken due to this and Trump’s actions undermining confidence in the U.S. currency. The Japanese Nikkei also reached a new record, rising by 1.58 percent, to 43,386 points. The Indian Nifty rose by 0.4 percent, the Shanghai by 0.56 percent, and the Hong Kong index by 1.88 percent.

– The recent rise in Japanese asset prices reflects positive steps taken by the government there to improve capital markets and corporate governance, particularly the sensitivity of companies to stock values – noted analysts at Fitch Solutions.

If the Japanese Liberal Democratic Party remains on a positive political path in terms of opening the domestic market to greater foreign investment and a larger number of foreign workers, ‘efforts to avoid deflation’ will continue to progress, they added.

However, expectations for a rate cut in the foreign exchange market are not as encouraging. The dollar index, which measures the performance of the U.S. dollar against six major world currencies, was down 0.05 percent this morning, at 98.05 points, after sliding half a percent on Tuesday. The dollar’s exchange rate against the euro weakened by 0.1 percent, to $1.1684 per euro, while it fell by 0.23 percent against the yen to 148.06 yen.

Trump Undermines Confidence in the U.S. Currency

With expectations of lower interest rates, investor confidence in the dollar has also been undermined by new attempts by U.S. President Donald Trump to undermine the Fed’s independence, after White House spokesperson Karoline Leavitt stated on Tuesday that the U.S. president is considering a lawsuit against Fed Chairman Jerome Powell regarding his management of the renovation of the central bank’s headquarters in Washington.

Trump is at odds with Powell and has criticized him multiple times for not easing interest rates sooner. Lower interest rates in the U.S. mean lower borrowing costs for the U.S.

Trump has also criticized Goldman Sachs CEO David Solomon, saying that the bank was wrong in predicting that U.S. tariffs would harm the economy and questioned whether Solomon should lead that institution.