Markets Rally as U.S. Growth Data Boosts Stocks

Global stocks rose for the fourth consecutive month, driven by strong U.S. growth data. Despite early August volatility, markets recovered as traders anticipated economic growth and potential interest rate cuts by the Federal Reserve. The dollar steadied, and U.S. bond yields remained low, reflecting market optimism.

Global stocks rose on Friday, marking a fourth straight month of gains, despite heavy selling earlier in August. The surge was propelled by robust U.S. growth data, which helped the dollar snap a weeks-long losing streak and kept bond markets on their toes. MSCI's world share index climbed 0.2%, heading towards a 1.8% monthly gain, while Europe's Stoxx index hit a record intraday high and Britain's FTSE 100 reached a three-month peak.

U.S. stock futures indicated a continuous positive trend on Wall Street, with Nasdaq futures gaining 0.7% and S&P 500 futures up 0.4%. This remarkable recovery from the early August sell-off has traders hopeful that the U.S. economy will maintain its growth trajectory without obstructing potential interest rate cuts.

Money markets are now pricing in the Federal Reserve's first 25 basis point cut of this cycle at its Sept. 18 meeting, with a 33% chance of a larger 50 bp reduction. A report showed that the U.S. economy grew faster than initially estimated in the second quarter, driven by strong consumer spending and corporate profits.

Meanwhile, an index of U.S. personal consumption expenditures (PCE) due later on Friday is expected to show a 2.6% year-on-year rise in July, slightly higher than the prior month but not alarming. Pictet Asset Management co-head of multi-asset Shaniel Ramjee cautioned that the current trend of simultaneous stock and bond rallies might not last.

Over in currency markets, the dollar steadied near a one-week high, poised to end a five-week losing streak but still facing a 2.5% monthly decline. Against the yen, the dollar was set to drop more than 3% for the month, while core inflation in Tokyo showed a 2.4% increase, suggesting more BoJ rate hikes are likely. The euro remained flat following softer-than-expected German inflation data.

In other markets, MSCI's Asia-Pacific index excluding Japan rose 0.7%, set for a 2.2% monthly increase. Japan's Nikkei, after its early month collapse, saw a modest rise but was set to end the month down 1.6%. Brent crude oil fell by 0.2%, while spot gold remained steady, supported by the weaker dollar.

(With inputs from agencies.)