Global Markets Rally as Inflation Eases; Investors Eye Fed Cut

Global stock markets hit record highs and the dollar weakened due to mild inflation data and expectations of a U.S. interest rate cut. The MSCI World Index and Japan’s Nikkei peaked, while European stocks gained. Optimism increased with President Trump's executive order pausing tariffs on China.

Global stock markets reached new heights and the dollar weakened as investors cheered the release of mild inflation data, coupled with expectations of a potential U.S. interest rate cut next month.

The MSCI All Country World Index set a new record at 951.74 points, buoyed by gains in Japanese and European stocks, which saw notable advances in defense shares. The optimistic sentiment was further fueled by President Trump's decision to pause tariffs on Chinese imports.

The anticipation of a Federal Reserve interest rate reduction increased following U.S. inflation readings that were slightly lower than expected. Investors are now pricing in a 98% chance of a September rate cut, with markets already reflecting this optimism. Meanwhile, the dollar struggled against major currencies, sinking to a two-week low.