Investors piled into stocks and bonds on Thursday, picking up signs that interest rates were nearing a peak on both sides of the Atlantic.
Wall Street stocks surged to their highest level since August, while European government bonds posted their biggest one-day gains in years.
In the US, the broad S&P 500 stock index rose 0.9% in late afternoon trading, while the tech-heavy Nasdaq Composite rose 2.6%, with gains in both indices slowing from earlier in the day.
The rally in U.S. Treasurys that started Wednesday continued after the Federal Reserve hiked rates more slowly than in recent months, suggesting a string of aggressive rate hikes was coming to an end. Fed Chair Jay Powell said the disinflationary process had begun for the first time in consumer goods. A Market Interpreted as Doves signal.
Yields on 10-year US Treasuries fell to 3.40%, the lowest since September. The rate-sensitive 2-year yield fell 0.03 points to 4.10%. As bond prices rise, bond yields fall.
The Bank of England expressed similar sentiments towards the Fed on Thursday. The BoE’s 0.5 percentage point rate hike was widely expected, but he withdrew previous guidance to continue to act “vigorously” to keep inflation in check.
In contrast, European Central Bank President Christine Lagarde vowed to “keep the course” when her institution raised interest rates by half a percentage point and promised the same in March. emphasized that future interest rate decisions would depend on future economic data.
“We are now in a position where the market is winning what appears to be a calibrated ‘light at the end of the tunnel’ signal from central banks,” said Nomura Securities analyst Charlie McElligott. rice field.
“Markets are voting at their feet, trains are leaving stations, highly speculative stuff is exploding and bond yields are plummeting,” he added. “[Central banks] I threw gasoline on the fire.”
Europe’s Stox 600 closed more than 1.3% higher while Germany’s Dax rose 2.2%. The FTSE 100 was up 0.8%.
The regional benchmark 10-year German government bond yield fell 0.22 points to 2.07%, reflecting higher prices. His risky Italian 10-year bond yield fell 0.4 points to 3.90%.
In the UK, traders expect the BoE’s next rate hike to be the last in the cycle, with borrowing costs expected to peak at 4.25% by August. In the Eurozone, the market expects interest rates to rise from 2.5% currently and peak at 3.25% in the summer.
“The market wants a rebound, it misses the slightly hawkish stuff, and it’s very exciting,” said Matthew Reese, head of global fixed income strategy at Legal & General.
The dollar index, which tracks the U.S. currency against a basket of six peers, has fallen more than a tenth in the past three months as the pace of rising interest rates slowed, but traded 0.5% higher on Thursday. .
In Asia, Hong Kong’s Hang Seng Index fell 0.5%, China’s CSI 300 fell 0.3% and Japan’s Nikkei rose 0.2%.
