Concerned about economic growth prospects, central banks in many countries have recently signaled monetary easing. Driven by these expectations, market sentiment has improved notably. According to statistics from Shanghai Securities News, since the beginning of this month, the three major U.S. stock indexes have all risen by more than 7%, while the three major European indexes have gained between 3% and 7%. During this period, international gold and oil prices have also climbed steadily, with gold prices hitting a nearly six-year high.
Last week, the much-anticipated Federal Reserve policy meeting decided to keep interest rates unchanged while signaling possible rate cuts. Compared with May, the rate statement removed the word "patient." Fed officials said they noticed rising economic uncertainty and subdued inflation and would take appropriate action to sustain the economic expansion.
Most market observers still expect the Fed to cut rates as early as July. The latest data from CME Group's FedWatch tool shows a 100% probability that the Fed will cut rates at least once in July.
The Bank of Japan also announced it would maintain its current accommodative monetary policy, keeping short-term rates at -0.1% and continuing to flexibly purchase government bonds to keep long-term rates around zero. This policy will remain in place at least until spring 2020. BOJ Governor Haruhiko Kuroda said the deteriorating trade environment has increased downside risks to the global economy, and the BOJ will closely monitor developments in global trade disputes.
The Bank of England announced that week it would keep its benchmark rate unchanged at 0.75% and cut its H2 UK economic growth forecast to zero. The bank noted that global trade tensions and the economic risks of a "no-deal Brexit" remain elevated, and that the manner and timing of Brexit will have a "significant impact" on the UK economy.
In addition, the central banks of Indonesia and Brazil both announced at their latest policy meetings that they would hold their benchmark interest rates unchanged.
European Central Bank President Mario Draghi said on the 18th that if inflation does not return to target, the ECB will ease policy again. Cutting interest rates is one of the ECB's policy options to address future risks. The Reserve Bank of Australia earlier also said further easing was "quite likely."
"Amid global trade disputes, international institutions have been downgrading their economic growth forecasts. To prevent their economies from sliding, countries have begun using monetary policy to adjust. In addition, inflation in most countries remains low, leaving room for rate cuts," Xu Mingqi, special researcher at the Shanghai Institute of International Finance and Economics and researcher at the Shanghai Academy of Social Sciences, told Shanghai Securities News.
To investors' relief, the signals of accommodative monetary policy have indeed, to some extent, lifted the clouds hanging over the market. Last week, U.S. stocks posted a third consecutive weekly gain, with the Dow rising 2.4% for the week, the Nasdaq up 3.0%, and the S&P 500 up 2.2%. Europe's three major indexes also performed well, with weekly gains ranging from 0.8% to 3.0%.
Commodity markets also received a clear boost. Last week, international gold prices broke through $1,400 per ounce, hitting a nearly six-year high. As of the close on the 21st, New York COMEX gold futures rose 4.27% for the week to $1,403.0 per ounce, while spot gold gained 3.68% for the week to $1,399.63 per ounce.
International oil prices also posted significant gains. Among them, the August-delivery light crude oil futures on the New York Mercantile Exchange rose 9.15% for the week, while London Brent crude futures gained 5.39%. As of the close on the 21st, the two major crude oil futures contracts settled at $57.60 per barrel and $65.35 per barrel, respectively.