Stocks in Europe and Asia climbed with US equity futures and Treasuries extended gains as the Federal Reserve’s dovish shift reverberated through markets. Gold advanced to the highest in more than five years and the dollar weakened against all major peers.
The Stoxx Europe 600 Index extended this week’s advance, boosted by gains in carmakers and technology shares as futures on the S&P 500 Index signaled a strong open in New York. The US benchmark closed about 0.7% from a record on Wednesday, after the Fed indicated an increased willingness to cut rates. The prospect of easier monetary policies in the world’s largest economy filtered through markets, and the 10-year Treasury yield at one point dropped below 2% to its lowest since November 2016. Emerging-market assets surged, and credit spreads slid.
In Asia, equities in China rallied ahead of FTSE Russell index changes next week. The yen and the Topix Index advanced after the Bank of Japan kept rates unchanged, as predicted by economists, and offered no further signal of easing. Japan’s 10-year bond futures rose to an all-time high.
Traders are now pricing in a virtual certainty the U.S. central bank will cut rates by July, Fed fund futures show. Seven of 17 Fed officials now think it will be appropriate to lower the benchmark overnight rate by a half-percentage point by the end of the year, according to updated projections published Wednesday. Fed Chairman Jerome Powell cited “uncertainties” in the outlook that have increased the case for a rate reduction as officials seek to prolong the near-record American economic expansion.