NEW YORK: Shares on Wall Street scaled record highs on Thursday, lifting stock markets around the world, while US Treasuries yields retreated as investors processed a second Donald Trump presidency and awaited a Federal Reserve policy decision.
The Fed is expected to cut interest rates by 25 basis points at the end of its policy meeting on Thursday, a decision that may seem a footnote given the uncertain economic terrain it may soon navigate under a second Trump administration.
“We think it more likely that the Federal Open Market Committee cuts by 25 bps, signalling that pauses could be appropriate at future meetings if inflation prospects deteriorate,” said Steve Englander, head of global G10 foreign exchange research and north America macro strategy. The S&P 500 rose 0.5%, the Dow Jones Industrial Average added 0.12%, and the Nasdaq Composite jumped 1.1%.
All three indices hit new all-time highs for a second consecutive day. The MSCI index for world stocks climbed 0.8%, also to a record high. Europe’s broad STOXX 600 index was last up 0.8% after Asian shares gained earlier in the day, with even onshore Chinese blue chips rising 3% as investor optimism over potential stimulus outweighed concerns about worsening trade tensions.
Stocks are “rewarding the presumed likelihood of corporate tax cuts and perceiving a general penchant toward deregulation across industries as positive for earnings,” said Naomi Fink, chief global strategist at Nikko Asset Management. “On the other hand, bond markets have responded unfavourably, with yields rising on the prospect of a united front between executive and legislative arms of government with respect to fiscal expansion.” “This comes at a time when US debt-to-GDP is already at historic highs near 120% and budget deficits already exceed 6% of GDP,” she said.
The benchmark 10-year yield was last at 4.3628%, down 6.3 basis points on the day, after a 14 basis point rise on Wednesday, and the 30-year yield was last at 4.5576%, down over 4 bps after the previous day’s 15 bp jump.
The dollar fell 0.9% against a basket of its peers after logging its biggest one-day gain in more than two years on Wednesday. Traders said they were closing out profitable bets on the Trump presidency and ahead of the Fed’s decision.
The euro climbed 0.9% to $1.0824 after Wednesday’s 1.8% fall, as investors also digested political turmoil in Germany where Chancellor Olaf Scholz sacked his Finance Minister Christian Lindner, causing the ruling three-party coalition to collapse and setting the stage for a snap election.
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