Wall Street rally continues as rate cut hopes strengthen

US equities extended their gains on Wednesday, building on the sharp rally seen in the previous session amid growing confidence in the prospect of multiple interest rate cuts by the Federal Reserve this year. The S&P 500 and Nasdaq 100 each advanced by approximately 0.30%, reaching fresh record highs, while the Dow Jones Industrial Average climbed over 300 points. Investor sentiment was buoyed by Tuesday’s CPI data, which showed a relatively modest increase in goods prices, easing concerns that tariffs might reignite significant inflationary pressures in the US economy.

In South Africa, the rand continued its upward momentum, benefiting from a softer US dollar and bolstered by the release of positive domestic business confidence and retail sales figures. By 13h10 GMT, the rand was trading at 17.54 to the dollar - about 0.40% stronger than its previous close - following a gain of over 1% on Tuesday. The Johannesburg Stock Exchange’s Top-40 index was last up 1.20%, while the yield on South Africa’s benchmark 2035 government bond fell 4.5 basis points to 9.62%, indicating stronger demand.

The UK’s FTSE 100 edged higher, approaching record territory but lagging behind its European counterparts. The gains were largely driven by the pharmaceutical sector, with AstraZeneca up 3%, GlaxoSmithKline over 2%, and Unilever adding 2%. Shares in gambling firm Evoke surged following a 44% increase in earnings despite just 3% revenue growth, attributed to cost efficiencies and improved marketing. While revenue in the UK and Ireland dipped after Euro 2024, earnings in those markets still rose, and international sales were up 13%.

Across Europe, equities closed significantly higher, hitting their best levels in two weeks. Optimism around lower US interest rates and the potential for reduced energy costs supported a more positive growth outlook across the eurozone. The STOXX 50 gained 1% to 5 390, and the broader STOXX 600 rose 0.60% to 551. Leading the session were heavyweight sectors including banking, luxury, and technology, with notable gains from Intesa Sanpaolo, LVMH, Kering, SAP, and Prosus, which rose between 1.50% and 4%.

In Asia, Japan’s Nikkei 225 climbed 1.30% to close at 43 275, while the broader Topix advanced 0.83% to 3 092 - both indices reaching new record highs. The rally was underpinned by Wall Street’s overnight performance and reinforced expectations for a Federal Reserve rate cut next month, coupled with a robust corporate earnings season in Japan that continues to support investor enthusiasm.

China's markets also posted solid gains. The Shanghai Composite rose 0.48% to close at 3 683 - its highest level since December 2021 - while the Shenzhen Component jumped 1.76% to 11 551. Sentiment was lifted by the ongoing US-China tariff truce, with US Treasury Secretary Scott Bessent confirming that further bilateral economic talks are expected within the next two to three months.

On the commodities front, WTI crude oil futures dropped to $62 per barrel, marking a two-month low, after the International Energy Agency projected a growing surplus in oil supply for both this year and next. Meanwhile, gold prices climbed towards $3 360 per ounce, as investors continued to assess the Fed’s policy trajectory following the latest inflation figures.