US stocks climbed last week on optimism about Federal Reserve rate cuts and enthusiasm for artificial intelligence, with the Dow, S&P 500, and Nasdaq reaching record highs before easing slightly Friday. Inflation data showed August CPI at 2.9% y/y and core at 3.1%, while wholesale inflation slowed to 2.6%. Despite remaining above the Fed’s 2% target, weaker labor data including higher jobless claims and downward payroll revisions supported expectations for a rate cut at the September 16–17 meeting. Consumer sentiment slipped to 55.4 in September, reflecting worries about business conditions and the labor market. Long-term Treasury yields declined on strong auction demand, while corporate and high yield bonds advanced on policy easing hopes.
The STOXX Europe 600 rose 1.03% as expectations grew for US rate cuts, with Italy’s FTSE MIB up 2.30%, France’s CAC 40 up 1.96%, Germany’s DAX up 0.43%, and the UK’s FTSE 100 up 0.82%. The ECB held its deposit rate at 2%, raised growth and inflation forecasts, and signaled the rate-cut cycle may be ending. In Germany, exports fell 0.6% in July as US demand weakened, while industrial output rose 1.3%. UK GDP stalled in July after June’s growth, dragged by weak manufacturing. In France, President Macron appointed Sebastien Lecornu as prime minister after Bayrou’s government collapsed.
