World stocks "celebrate" before the signal of the US Federal Reserve

Global stock markets surged on August 23 after US Federal Reserve Chairman Jerome Powell made it clear that the central bank was ready to cut interest rates, a message that investors had long been expecting.

Investors have been on edge all week as they await Chairman Powell's keynote speech at the annual central bank conference in Jackson Hole, Wyoming.

Traders are hoping that Mr. Powell will provide a clearer signal on the upcoming interest rate issue after data released earlier this month raised recession concerns and rattled markets. The Fed will announce its next interest rate decision on September 18.

Mr. Powell did not disappoint investors. He said the time had come to adjust policy, and he was confident that inflation was on a sustainable path back to the Fed’s 2% target. The direction was clear, and the timing and pace of rate cuts would depend on incoming data.

Wall Street stocks traded in positive territory throughout the session, with the S&P 500 index ending the session up 1.2%. Specifically, the Dow Jones Industrial Average rose 1.1% to 41,175.08 points, the S&P 500 index rose 1.2% to 5,634.61 points, and the Nasdaq Composite technology index rose 1.5% to 17,877.79 points.

Major European stock markets also closed higher. London's FTSE 100 index rose 0.5% to 8,327.78 points, while Paris' CAC 40 index rose 0.7% to 7,577.04 points. The DAX 30 index in Frankfurt rose 0.8% to 18,633.10 points.

The Fed kept interest rates at a 23-year high after raising them to a range of 5.25-5.50 percent to combat inflation, which has cooled, while central banks in Europe began cutting rates.

The dollar, which typically strengthens when borrowing costs rise, fell against the euro, pound and yen, which also rose after Bank of Japan Governor Kazuo Ueda signaled that another interest rate hike was possible.

On August 23, Governor Kazuo Ueda told Japanese lawmakers that the BoJ could raise interest rates again if inflation and the economic situation progressed as expected, and the yen rose against the dollar after his remarks.

The world stock market last week experienced quite complex fluctuations, affected by many different factors, mainly revolving around expectations about the Fed's monetary policy.

In the first session of the week of August 19, the US stock market increased, continuing the optimistic trend of last week. The market is waiting for the business results of US retailers and comments from Fed officials on interest rate policy.

Last week's upbeat data eased concerns about the health of the US economy after markets were hit hard this month by fears of a recession and Japan's interest rate hike.

Business results from major US retail chains such as Target, Lowe's and TJX this week will provide more information about the health of the world's largest economy after positive retail data last week.

However, there was not much momentum to continue pushing stock prices up in the session on August 20.

Joe Mazzola, a strategist at Charles Schwab, said the stock market appears to be in a wait-and-see mode ahead of the Fed minutes on Aug. 21 and a slew of retail earnings reports.

Expectations of a Fed rate cut helped lift European and US stocks on August 21. Markets continued to bet on a September rate cut following the minutes of the Fed’s latest meeting, which showed a majority of policymakers supported a rate cut if economic data came in as expected.

Analysts say a weakening jobs market is a driver of the Fed's ability to cut interest rates, although there are still hopes of a so-called "soft landing" that could help prevent a recession in the US.

US owned home sales rose more than expected in July 2024, reversing a four-month decline, according to data released by the National Association of Realtors (NAR), as improved supply and falling mortgage rates raised hopes that the market could recover in the coming months.

On a seasonally adjusted basis, sales of previously owned homes rose 1.3 percent in July to a seasonally adjusted annual rate of 3.95 million units, above the 3.93 million forecast by economists polled by Reuters. However, sales of previously owned homes, which account for the majority of U.S. home sales, fell 2.5 percent year-over-year through July. The median price of a previously owned home rose 4.2 percent year-over-year to $422,600.

Meanwhile, inventory of previously owned homes rose 0.8 percent to 1.33 million units in July. Supply was up 19.8 percent from a year earlier. However, affordable housing remains scarce and there is not enough new construction.

Last week, the government reported single-family home construction fell to a 16-month low in July, while future building permits fell slightly.

At July’s sales pace, it would take about four months to sell all of the existing homes, up from 3.3 months a year ago. A supply of four to seven months is considered a healthy balance between supply and demand.

Data from mortgage finance company Freddie Mac also showed the average interest rate on a 30-year fixed mortgage fell to 6.46% in the week ended Aug. 22, its lowest since May 2023, from 6.49% the previous week.

While interest rates have been steadily falling, they have not been enough to spur potential homebuyers, and another 1% cut may be needed to generate buyer demand, according to Freddie Mac chief economist Sam Khater. Meanwhile, NAR chief economist Lawrence Yun said that despite modest gains, home sales remain sluggish.

Meanwhile, annual US job growth through March 2024 fell short of initial expectations. The US Department of Labor revised its estimate of total job creation for the April 2023-March 2024 period down by 818,000 jobs from the initial report. The revision brought the average monthly job growth for the period down to 174,000 jobs per month, down from the previously reported 242,000 jobs.

Private sector employment growth was also revised down by 819,000 jobs from the previous estimate, while government employment growth was essentially unchanged. On a seasonally adjusted basis, the revised report from the Labor Department showed that the private sector and government agencies employed an estimated 157.3 million workers in the April 2023-March 2024 period, down from the previously reported 158.1 million jobs.

The business and services sector saw the largest downward revision, down 358,000 jobs, or 1.6 percentage points from the previous estimate, followed by leisure and hospitality with a decline of 150,000 jobs. Manufacturing saw a decline of 115,000 jobs. The few industries that saw upward revisions included private education and health services, up 87,000 jobs, transportation and warehousing, up 56,400, and utilities, up 1,700.

The Labor Department's data will continue to be revised until the final benchmark report is released in February 2025. However, the final revisions are typically not much different from the preliminary revisions.

A wave of profit-taking sent all three major stock indexes on Wall Street lower on August 22, amid a decline in technology stocks and rising bond yields as recession concerns eased.

Analyst Patrick O'Hare of stock market analysis site Briefing.com said the decline was a natural reaction in a low-volume market after the market's recent gains.

In general, the world stock market is expected to continue to fluctuate strongly in the coming time. Investors need to be mentally prepared to face risks and seize opportunities.