On Thursday, the global stock market experienced a substantial rally, with European shares leading the charge and a notable uptick in U.S. weekly jobless claims fueling expectations of potential interest rate cuts. Meanwhile, the dollar’s decline underscored market anticipation of key inflation data scheduled for release in the upcoming week.
In Europe, both the pan-European STOXX 600 and Britain’s FTSE 100 surged by 0.19% and 0.33% respectively, reaching new record highs. This bullish sentiment was primarily driven by the Bank of England’s decision to maintain rates unchanged while hinting at a potential rate cut in the near future. Germany’s DAX also hit a peak during the trading session.
In the United States, major indices initially experienced sluggishness but later gained momentum, with the Dow industrials marking their seventh consecutive day of gains. The release of new data indicating a softening labor market buoyed investor optimism, raising hopes for potential rate cuts by the Federal Reserve, possibly as early as September. U.S. initial claims for state unemployment benefits surpassed expectations, increasing by 22,000 to 231,000 for the week ended May 4, according to the Labor Department.
Market analysts interpreted this as part of the ongoing “bad news is good news” macroeconomic dynamic, indicating that weaker economic indicators could prompt central banks to implement accommodative monetary policies. Matt Miskin, co-chief investment strategist at John Hancock Investment Management, highlighted the significance of the unexpected rise in initial jobless claims, emphasizing its potential implications for future monetary policy decisions.
Moreover, positive earnings reports and the anticipation of interest rate reductions contributed to the upward trajectory of U.S. stocks. James Ragan, director of Wealth Management Research at D.A. Davidson, underscored the alignment between aggressive earnings estimates and the Federal Reserve’s dovish stance on interest rates, bolstering investor confidence in equities.
On a global scale, MSCI’s gauge of stocks closed up 0.38%, with the Dow Jones Industrial Average advancing by 0.85%. In Europe, the Bank of England’s indication of a possible rate cut garnered investor favor, particularly with two of the BoE’s nine rate setters voting for a cut. Governor Andrew Bailey hinted at the likelihood of more rate cuts than initially anticipated, reinforcing market expectations for a more accommodative monetary policy stance.
Amidst these developments, the dollar index, which measures the U.S. currency against a basket of six peers, declined by 0.28% to 105.22. The euro strengthened against the dollar, reaching $1.0781, while the yen experienced a slight decrease to 155.420 per dollar. Sterling also rebounded modestly to $1.2521.
Furthermore, relief regarding the absorption of $125 billion in new note and bond supply contributed to a retreat in benchmark Treasury yields. The yield on the 10-year Treasury note fell to 4.459%, while the two-year note’s yield decreased to 4.8133%.
In Asia, Chinese stocks continued their recent outperformance, supported by positive trade data and developments in the property market. Chinese imports surged by 8.4% in April, surpassing expectations, while exports returned to growth as forecasted. In response, Chinese shares, including blue-chip stocks, registered gains, with the Hang Seng index in Hong Kong increasing by 1.2%. Conversely, Japan’s Nikkei and Australia’s resources-heavy share market experienced declines.
In commodity markets, both U.S. crude and Brent crude oil prices rose, with U.S. crude settling at $79.26 a barrel and Brent at $83.88 a barrel. Gold prices also witnessed a notable increase of more than 1%, following the release of new unemployment claims data, which reinforced expectations of potential rate cuts. U.S. gold futures for June delivery settled at $2,340.30 per ounce. Additionally, Bitcoin gained 1.59%, reaching $62,555.92.
Overall, the global stock market demonstrated resilience and optimism amid evolving economic dynamics, with investors closely monitoring key economic indicators and central bank policies for further insights into market trends and potential opportunities.