US stocks rose towards all-time highs and Treasuries climbed with gold as comments by Jerome Powell cemented market bets for a rate cut this month.
Equities that had slumped since the strong jobs report rallied back to intraday records after the Fed chairman signalled a willingness to lower rates, citing a slowing global economy and trade issues. Gains faded as he testified to Congress, with financial shares leading the pullback.
“Psychologically, when you hit those round numbers you get a little bit of resistance — you hit it and it fails,” said Aaron Clark, portfolio manager at GW&K Investment Management. “The big round numbers, you tend to get a level that’s tough to power through.”
The yield on 10-year Treasuries fell to 2.04 percent after climbing above 2.10 percent for the first time in a month, while two-year rates slumped to 1.82 percent. The dollar weakened versus major peers, gold topped $1,400 again and oil rose above $59 a barrel in New York.
“A rate cut in July is now all but certain,” said James McCann, senior global economist at Aberdeen Standard Investments. “The strength of last week’s jobs number did lead some to think that the Fed may pause for thought. It’s clear from this that they won’t.”
The Powell remarks came ahead of two days of testimony in Congress on the economic and policy outlook.
With both equities and bonds sitting on outsize gains since the start of the year, it’s unclear what further impetus they can get given that traders are already discounting a cycle of interest-rate cuts.
In Europe, strong manufacturing data from France and low demand at an auction of German bunds weighed government debt. Equities headed for a fourth straight slide.
The pound halted a drop to a two-year low as data showed the UK economy rebounded in May.
The trading session in Asia was mixed, with modest gains in Hong Kong and South Korea and slides in Japan and China.
Powell was expected to testify before Congress on monetary policy and the state of the US economy on Wednesday (the House of Representatives) and on Thursday (the Senate).
Fed minutes are due on Wednesday, ECB minutes on Thursday.
A key measure of US inflation — the core consumer price index, due on Thursday — is expected to have increased 0.2 percent in June from the prior month, while the broader CPI is forecast to remain unchanged.
US producer prices are due on Friday.
The S&P 500 Index rose 0.4 percent in New York, paring an advance that reached 0.8 percent. The Dow Jones Industrial Average rose to 26,863 and the Nasdaq 100 added 0.8 percent. The Stoxx Europe 600 Index fell 0.2 percent.
The MSCI Asia Pacific Index increased 0.1percent. The MSCI Emerging Market Index advanced 0.8 percent.
The Bloomberg Dollar Spot Index fell 0.3 percent. The euro increased 0.4 percent to $1.1249, the biggest climb in more than two weeks. The British pound climbed 0.4 percent to $1.2513. The Japanese yen rose 0.3 percent to 108.589 per dollar, the weakest in almost six weeks.
The yield on 10-year Treasuries fell two basis points to 2.04 percent. The two-year rate sank six basis points to 1.84 percent. Germany’s 10-year yield increased four basis points to -0.316 percent.
Gold futures rose 0.86 percent to $1,412.20 an ounce. West Texas Intermediate crude gained 2.2 percent to $59.12 a barrel, hitting the highest in almost two weeks with its fifth straight advance.