Global equity markets are buoyed by the prospect of Fed tapering and healthy earnings By Investing.com

Global stocks rose last week on rising expectations of an interest rate cut by the Federal Reserve, even as manufacturing data showed signs of easing.

The MSCI AC World Index, the global equity benchmark that tracks the performance of stocks in both developed and emerging markets, gained 1.7 percent on the week, according to Bank of America’s report on Monday. Year to date, global stocks are up 14.4%.

Europe and Japan were the best performing regions last week with gains of 3.0% and 2.1% respectively, while emerging markets trailed with a 0.6% increase.

At a global sector level, the best performers last week were previously lagging sectors, including real estate, which rose 3.0%, and materials, which rose 2.9%. Energy was the only global sector to post a negative return, falling 0.1 percent as oil prices fell.

By style, Bank of America strategists said risk outperformed, rising 2.5 percent, and small-caps also posted gains, up 1.8 percent.

“Global equity markets continue to respond well to the prospect of easier monetary policy in the US and Europe, along with a healthy global earnings cycle,” the strategists wrote.

In the US, all three major indexes posted a positive week. The Dow rose nearly 1.3%, the Nasdaq 1.4% and the S&P 500 rose 1.45%.

Stocks got a boost Friday morning after Fed Chairman Jerome Powell hinted at potential interest rate cuts during his speech in Jackson Hole, Wyoming. However, Powell did not specify the timing or extent of any future rate cuts.

“The time has come for policy to adjust,” Powell said during the Fed’s annual retreat. “The direction of travel is clear and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”

Powell’s comments were welcomed by traders, who are unanimously in favor of a rate cut at the September meeting, based on CME Group’s FedWatch tool. However, there is less agreement on the expected size of the rate cut.