S&P 500, Dow indexes trade higher
Nikkei slips as yen climbs
Markets imply nearly 40% chance Fed cuts by 50 bps
Oil gains as Libya shuts production, Israel-Hezbollah spar
(Updates lede, headline and prices throughout with U.S. market open)
World stock markets edged higher on Monday buoyed by optimism that U.S. interest rates are likely to be lowered soon even as oil prices jumped amid increased tensions in the Middle East.
The benchmark S&P 500 index .SPX and the Dow .DJI traded higher, European shares .STOXX climbed, and trading was subdued with the London market closed for a UK public holiday. Japan's blue-chip Nikkei stock index closed down almost 0.7% .N225 as the yen firmed.
The Dow Jones Industrial Average .DJI rose 0.47% to 41,367.08, the S&P 500 .SPX gained 0.11% to 5,641.02 and the Nasdaq Composite .IXIC lost 0.21% to 17,840.46. MSCI's gauge of stocks across the globe .MIWD00000PUS rose 0.13% to 832.39.
Israel and Hezbollah traded rocket salvos and airstrikes on Sunday, stirring worries about possible oil supply disruptions if the conflict escalated. Crude prices were also buoyed by Libya's eastern-based government announcement of the closure of all oil fields on Monday, which halted production and exports.
Both Brent and U.S. crude prices LCOc1 CLc1 rose more than 3%, with Brent trading up 3.11% to $81.48 per barrel and West Texas Intermediate adding 3.59% to $77.52 per barrel.
In a highly-anticipated speech to the Jackson Hole symposium on Friday, Federal Reserve chief Jerome Powell said the time had come to start easing policy and emphasised the central bank did not want to see further weakening in the labour market.
Also speaking at Jackson Hole, European Central Bank chief economist Philip Lane struck a more cautious note at the weekend, saying the central bank was making "good progress" in cutting euro zone inflation back to its 2% target, but success was not yet assured.
"Comparing the Fed to the ECB, the Fed is more focused on the labour market and whether it has tightened too much," said David Kohl, chief economist at Julius Baer in Frankfurt.
The yield on benchmark U.S. 10-year notes US10YT=RR rose 0.7 basis points to 3.814%. The two-year note US2YT=RR yield, which typically moves in step with interest rate expectations, rose 0.8 basis points to 3.921%.
Fed fund futures
0#FF: are fully priced for a quarter-point cut at the Sept. 18 meeting, and imply a 38% chance of a 50 bps move. The market also has 103 bps of easing priced in for this year and another 122 bps in 2025. FEDWATCHThe ECB has already started cutting rates, with a 25 bps reduction in July, with a further two quarter point reductions priced in by year-end.
NVIDIA AWAITED In share markets, focus was already turning to the latest earnings from AI star Nvidia NVDA.O , which reports on Wednesday to sky-high market expectations.
The stock is up some 160% year-to-date, accounting for around a quarter of the S&P 500's 18% year-to-date gain.
"Nvidia will beat consensus expectations, they always do, but investors are so ingrained in seeing revenue come in $2 billion-plus above the analysts' consensus or we could easily see a sell-the-news event," said Chris Weston, head of research at broker Pepperstone.
That means Nvidia would have to report sales of $30 billion or more and guidance for the third quarter of $33 billion or above, he added.
Also in focus are U.S personal consumption and core inflation data due on Friday, along with a flash reading on European Union inflation. Analysts generally assume the data will be benign enough to allow for rate cuts in September.
The dollar fell to a three-week low at 143.45 yen. It was last down around 0.03% at 144.32 yen JPY=EBS , having fallen 1.3% on Friday. The euro edged down 0.28% to $1.1159 EUR=EBS , but remained just off a 13-month top. The British pound sterling GBP= weakened 0.14% at $1.319.
Gold prices firmed, nearing the recent record high on safe-haven demand. Spot gold XAU= added 0.27% to $2,517.22 an ounce. U.S. gold futures GCc1 gained 0.29% to $2,515.70 an ounce.
((To read Reuters Markets and Finance news, click on https://www.reuters.com/finance/markets For the state of play of Asian stock markets please click on:
0#.INDEXA ))
