GLOBAL MARKETS-Stocks, oil extend rally into second day

WASHINGTON, Oct 4, Reuters -- U.S. stocks and oil extended a comeback into a second day, while U.S Treasury yields fell on hopes that efforts by central banks to fight inflation may be lessened in the future.

That sentiment helped push Wall Street higher Tuesday, with the Dow Jones Industrial Average up 2.49%, the S&P 500 jumping 2.74% and the Nasdaq Composite up 3%.

The MSCI world equity index, which tracks shares in 45 nations, was up 3.1% last year.

The yields of global bonds fell to 3.609%, with those on the benchmark U.S. 10 year Treasury note falling to 3.609%. The yield fell by nearly 20 basis points on Monday, after it had topped 4.0% last week.

The labor market may be starting to cool as higher interest rates take hold, according to the U.S. Department of Labor.

In August, there were 1.7 job openings for every unemployed person, down from two in July. The Fed officials insist that they have more work to do to control inflation as the layoffs remained low, a sign of a still tight labor market that could keep the Federal Reserve on its aggressive monetary policy tighter, as layoffs remained low.

We don't expect a change in the Fed's actions at the next meeting. Jeffrey Roach, chief economist for LPL Financial, said that the labor market moved from 'extremely tight' to just'very tight' and the Fed will likely respond by another 0.75% increase in the Fed funds rate next month.

The softer economic data based on a weaker than expected U.S. manufacturing report and a slimmer rate hike out of Australia, as the Reserve Bank of Australia surprised markets with a slimmer than anticipated interest rate hike, boosted hopes that other central banks could follow suit.

The RBA decision will stoke speculation that other central banks will slow down the pace of hikes, TD Securities analysts said in a note.

Friday's U.S. jobs report will be a major piece of data that shows whether rate hikes have begun to take an economic toll.

The dollar was on course for a fifth consecutive day loss against a basket of currencies with falling Treasury yields - its longest streak of declines since August 2021 - as investors began to price in the possibility that tighter credit conditions will make the Federal Reserve tread more carefully. The index was down 1.38% to 110.207 at the end of the day.

Markets believe that inflation is going to drop more quickly. On a five-year horizon, investors see inflation at just 2.33%, down from nearer 3% six weeks ago.

The prospect of output cuts from the world's biggest exporters led to an upward swing in oil prices. Brent crude was up 2.84% to $91.41 a barrel, while U.S. crude was up 2.93% at $86.10 per barrel.

The dollar's slide has helped boost gold, with spot gold prices rising by 1.48% to $1,725. It was 59 an ounce.