World stocks jump; dollar and yields fall after Fed rate-cut signal
By Lewis Krauskopf NEW YORK (Reuters) - World stock markets gained on Thursday, with the U.S. benchmark S&P 500 hitting a record high, while the 10-year U.S.
By Lewis Krauskopf
NEW YORK (Reuters) - World stock markets gained on Thursday, with the U.S. benchmark S&P 500 hitting a record high, while the 10-year U.S. Treasury yield fell below 2% as investors digested a signal from the Federal Reserve of potential U.S. interest rate cuts as soon as its next meeting.
The dollar weakened after the Fed, the U.S. central bank, on Wednesday indicated a marked shift in sentiment even as it left its benchmark rate unchanged for now.
“We have obviously morphed into the Fed taking the pole position as far what’s driving the market right now, both domestically and on a global basis as well,” said Mike Mullaney, director of global markets research at Boston Partners.
"It’s risk-on trade again right now for the time being and I don’t see anything on a near-term basis that is going to disrupt that."
Oil prices surged, with an extra boost from news that Iran shot down a U.S. military drone, raising fears of a military confrontation between Tehran and Washington.
MSCI's gauge of stocks across the globe gained 0.88%. The index hit its highest since May 1.
On Wall Street, the Dow Jones Industrial Average rose 145.09 points, or 0.55%, to 26,649.09, the S&P 500 gained 15.94 points, or 0.54%, to 2,942.4 and the Nasdaq Composite added 37.32 points, or 0.47%, to 8,024.65.
Energy, technology and industrials were among the best-performing S&P 500 sectors.
“Cyclicals are definitely getting a big pop today,” Mullaney said.
Shares of Slack Technologies Inc, the fast-growing workplace messaging and communication platform, surged in their debut.
The pan-European STOXX 600 index rose 0.36%, reaching its highest since early May.
Bank of England officials voted unanimously to hold interest rates despite some recent suggestions from policymakers that borrowing costs should go up. The BoE cut its economic growth forecast for Britain to zero in the second quarter.
Benchmark government bond yields in the United States and Europe tumbled following the Fed's decision, with the U.S. 10-year note yield falling below 2% for the first time in 2-1/2 years.
Benchmark 10-year U.S. notes last rose 10/32 in price to yield 1.994%, from 2.027% late on Wednesday.
"The statement indicated the Fed no longer insists on a pause or patience, providing an open ear to doves at upcoming meetings. Also critical ... acknowledgment that inflation pressures are muted," said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee.
"As difficult as it might be to imagine, rates are also free to fall further," he added.
The dollar index, which measures the greenback against a basket of currencies, fell 0.49%, with the euro up 0.61% to $1.1293.
U.S. crude rose 5.39% to $56.66 per barrel and Brent was last at $64.16, up 3.79%.
(Additional reporting by Gertrude Chavez-Dreyfuss in New York and Tom Wilson in London; editing by Larry King, James Dalgleish and David Gregorio)
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