Global Stocks Rally as Cooling U.S. Inflation Boosts Rate-Cut Bets

Global equity markets surged on Tuesday after U.S. inflation data came in softer than expected, fueling optimism that the Federal Reserve will begin cutting interest rates as early as September. The report showed price growth moderating more than anticipated, prompting investors to sharply increase their expectations for monetary easing, with market-based odds of a September cut jumping to nearly 94%, up from about 57% a month ago.

Asian markets led the advance, with Japan’s Nikkei 225 breaking above the 43,000 mark for the first time and closing at a record 43,274.67. The broader Topix index also hit a new all-time high at 3,091.91, supported by strength in technology and export-oriented shares. The MSCI All Country World Index followed suit, reaching its highest level on record.

Investor sentiment was further lifted by signs of improved U.S.–China trade relations, as both sides agreed to extend a tariff truce, easing concerns over supply chain disruptions. In currency markets, the U.S. dollar weakened against most major peers amid political uncertainties and questions over the future direction of Federal Reserve policy.

Commodities also benefited from the risk-on mood. Oil prices edged higher on expectations of stronger demand, while gold gained modestly as a weaker dollar made the metal more attractive to international buyers. In cryptocurrency markets, Ether jumped to its highest level in almost four years, extending recent gains on optimism over blockchain adoption and favorable regulatory developments.

Analysts said that while the market reaction reflects growing confidence in a softer interest-rate path, upcoming U.S. retail sales and labor market data will be closely watched to confirm the trend and sustain the rally.