Shares on Wall Street scaled record highs on Thursday, lifting stock markets around the world, while U.S. Treasury yields retreated further after the Federal Reserve cut interest rates and as investors processed a second Donald Trump presidency.
The Fed lowered rates by 25 basis points on Thursday, as expected, noting that the job market has generally eased while inflation is moving toward its 2% target - saying price pressures had "made progress," compared with prior language that it had "made further progress."
“The Fed didn’t rock the boat," said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. "The big question now is will they cut again in December? Our best guess is they do, as inflation continues to improve.”
The S&P 500 rose 0.74%, the Dow Jones Industrial Average was flat, and the Nasdaq Composite jumped 1.5%. The S&P 500 and the Nasdaq both ended at all-time highs for a second consecutive day. The MSCI index for world stocks climbed 0.9%, also to a record high.
Europe's broad STOXX 600 index rose 0.6% 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.
Treasury yields extended declines after the Fed's rate cut, though some investors warned that rates may not fall as steadily as some might have expected under a second Trump administration.
"A Republican sweep seems very likely, and looser fiscal policy as well as trade tariffs might lift not only growth but also inflation," said Matthias Scheiber, global head of portfolio management at Allspring Global Investments Systematic Edge Team in London.
The benchmark 10-year yield was last at 4.3355%, down 9 basis points on the day, after a 14 basis point rise on Wednesday, and the 30-year yield was last at 4.5393%, down over 6 bps after the previous day's 15 bp jump.
The dollar fell 0.7% 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 0.7% to $1.0803 after Wednesday's 1.8% fall, as investors also digested political turmoil in Germany where Chancellor Olaf Scholz sacked Finance Minister Christian Lindner, causing the ruling three-party coalition to collapse and setting the stage for a snap election.
Deutsche Bank analysts said that while still early, the developments could be positive for the euro due to the potential confidence boost from a more stable German government and the direct economic effects of a potentially more proactive fiscal stance.
Germany's 10-year government bond yield was last up 4.8 basis points at 2.441%.
CENTRAL BANK DECISIONS
In advance of the Fed, the Bank of England cut interest rates by a quarter point on Thursday for only the second time since 2020. The bank said future reductions were likely to be gradual, as it saw higher inflation after the new government's first budget last week.
Sterling extended its gains slightly after the decision and was last up 0.8% at $1.2986, following a 1.24% slide on Wednesday.
Central banks in Norway and Sweden also held meetings on Thursday, though they met market expectations and did little to disrupt currency markets. Norges Bank at the hawkish end of the developed market spectrum kept rates unchanged at a 16-year high, and Sweden's Riksbank cut by 50 bps.
Bitcoin reversed earlier losses and vaulted to another record high of $76,780 overnight. Trump had vowed to make the United States "the crypto capital of the planet."
Gold added 1.8%, following Wednesday's more than 3% tumble, to $2,707.21 an ounce. However, that was still not far from its recent record high of $2,790.15.
Oil reversed losses from a sell-off triggered by the U.S. presidential election.
Brent crude oil futures rose 0.6% to $75.4 per barrel. U.S. West Texas Intermediate (WTI) crude also added 0.5% to settle at $72.04.
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