By Isla Binnie and Caroline Valetkevitch
NEW YORK (Reuters) -World stock indexes mostly rose and the U.S. dollar gained against the yen on Tuesday after solid U.S. retail sales data was taken as supporting prospects the Federal Reserve will ease rates to rein in inflation while aiming to avoid a recession.
Data showed retail sales unchanged in June from a May reading that was higher than initially estimated.
Echoing comments from Fed Chair Jerome Powell on Monday, Fed Governor Adriana Kugler said recent data suggests inflation is returning to the central bank's 2% target. Investors are pricing in a cut of at least 25 basis points (bps) at the U.S. central bank's September meeting, according to CME's FedWatch Tool.
The retail sales data suggest consumers are still spending, "so the market definitely saw that as a favorable data point," said Dustin Thackeray, chief investment officer at Crewe Advisors in Salt Lake City.
MSCI's gauge of stocks across the globe rose 3.00 points, or 0.36%, to 831.73. The Dow Jones Industrial Average reached an all-time closing high of 40,954.48.
Investors kept pondering the implications of a possible Donald Trump victory in the upcoming U.S. presidential election following the attempted assassination on Trump on Saturday.
The Republican former president has indicated support for policies traditionally seen as friendly to domestic businesses, such as loosening regulation, increasing tariffs on some foreign imports and cutting taxes.
The S&P 500 gained 35.98 points, or 0.64%, to 5,667.20 and the Nasdaq Composite gained 36.77 points, or 0.20%, to 18,509.34.
"Obviously the market liked the boost in his ratings and the potential for a Trump presidency... we know what we're getting with Trump," Thackeray said.
Boosting the Dow and S&P 500 was UnitedHealth Group (NYSE:UNH), which gained more than 6% after strong results.
In Europe, the STOXX 600 fell 0.28%.
A CLOSE RACE
Opinion polls show a close race between Trump and President Joe Biden, though Trump leads in several states that are likely to decide the November election.
Trump's nomination on Monday of his onetime critic, Ohio Sen. J.D. Vance, as his vice presidential running mate, also reverberated in financial markets.
"Vance is particularly tough on China, so that’s one of the reasons for the weakness in Chinese assets today," said Colin Asher, economist at Mizuho.
Shares of Trump Media & Technology Group gave back some of the large gains racked up on Monday, falling 9.1% on the day.
The dollar index, which measures the greenback against a basket of currencies, was near flat at 104.22 after giving up earlier gains, with the euro up 0.05% at $1.0899.
Against the Japanese yen, the dollar strengthened 0.22% to 158.37.
Investors are still closely watching the yen after Tokyo's suspected intervention last week disrupted the popular carry trade.
Japanese officials also issued fresh warnings of possible measures.
Data on Tuesday showed the Bank of Japan likely intervened a second time on July 12 to the tune of 2.14 trillion yen ($13.50 billion) to support the currency, following some $22.43 billion apparently spent on intervention the previous day.
The yield on benchmark U.S. 10-year notes hit a four-month low on rate cut expectations, falling 6.6 basis points to 4.163%, from 4.229% late on Monday.
Oil prices racked up their third straight day of losses. Brent futures closed down 1.3%, to $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 1.4%, to $80.76.