Global Markets Firm as Fed Rate Cut Optimism Rises

Stock markets globally recovered amid hopes of a U.S. Fed rate cut, driven by benign inflation data and expectations for economic stimulus. The dollar weakened, oil prices rallied, and bond yields edged up as market sentiment stabilized after early August turmoil.

Stock markets around the world were on firmer ground on Thursday, continuing to recover from an early August rout, as optimism grew that the U.S. Federal Reserve may soon cut interest rates. The dollar remained weak following benign U.S. consumer inflation data that reinforced bets on a September Fed rate cut. Meanwhile, oil prices rallied, and data from China dashed expectations of a speedy recovery in the world's second largest economy.

U.S. stock futures rose, signaling a positive opening for Wall Street. European stocks also firmed, though trade was subdued due to public holidays in many countries, while Asian stocks gained. Japan's blue-chip Nikkei rose 0.8%, buoyed by strong economic data from the second quarter, and Chinese blue chips firmed nearly 1% as lackluster economic data boosted hopes for more stimulus.

Market sentiment began to recover from the earlier turmoil when softer-than-expected U.S. job data stoked fears of a recession, and yen carry trades were rapidly unwound following a surprise rate hike in Japan. The VIX volatility index, a key gauge of investor anxiety on Wall Street, approached its lowest levels since the start of the month after reaching a four-year high on August 5.

(With inputs from agencies.)