European stocks gained ground on Thursday after the Swiss National Bank implemented an interest rate cut, marking a significant day for monetary policy in the region. The Stoxx 600 increased by 0.4%, led by advancements in the technology, insurance, and real estate sectors. U.S. future contracts also showed strength, indicating potential fresh record highs in the tech-driven rally when Wall Street reopens after a public holiday.
The dollar edged higher against a basket of currencies, and 10-year Treasury yields climbed by three basis points.
Swiss policymakers reduced borrowing costs for the second time, attributing the decision to a decrease in inflationary pressures compared to the previous quarter. Consequently, the Swiss franc weakened, falling approximately 0.4% against the euro and 0.5% against the dollar.
“The fact we are seeing interest rates come down suggests they are confident that inflation dynamics are improving,” said Guy Miller, chief market strategist at Zurich Insurance. This move “bodes reasonably well for other central banks,” he added.
Later on Thursday, both Norges Bank and the Bank of England are expected to maintain their current interest rates.
Market Movements and Key Developments
In France, the Treasury is set to auction up to €10.5 billion ($11.3 billion) in bonds for the first time since President Emmanuel Macron called a snap election. This auction will provide insights into whether the recent market rout has driven yields to levels attractive enough for buyers.
A two-day rally in Asian markets paused, with a gauge of technology firms in Hong Kong sliding. The Japanese yen continued its decline against the dollar for a sixth consecutive session.
The offshore yuan reached its weakest level this year, suggesting that policymakers are loosening their grip on the currency. The People’s Bank of China set the yuan’s daily reference rate at its lowest point since November.
Chinese bonds gained attention after PBOC Governor Pan Gongsheng indicated that the central bank would start trading government bonds on the secondary market. Consequently, the country’s 10-year government bond futures reached a record high.
U.S. Market Outlook
Wall Street has been buoyed by ongoing enthusiasm for artificial intelligence and resilient economic growth, which should continue to support corporate earnings, particularly in the technology sector.
Questions are emerging about potential threats to the stock rally. “The underlying market breadth has been poor, with limited participation, suggesting the rally has a shaky foundation,” noted Chris Weston, head of research at Pepperstone Group in Melbourne. “Betting against AI has been challenging, so until major AI-driven stocks falter, any pullbacks at the index level are likely to be shallow and well-supported.”
Commodity and Currency Markets
In commodities, oil prices edged higher ahead of the release of weekly inventory data from the U.S. Gold prices rose after closing the previous session relatively unchanged.
Key events to watch this week include Eurozone consumer confidence data, the UK Bank of England rate decision, U.S. housing starts, initial jobless claims, Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, U.S. existing home sales, and the Conference Board leading index. Additionally, Federal Reserve’s Thomas Barkin is scheduled to speak.
Market Summary
Stocks:
1.The Stoxx Europe 600 rose 0.4% as of 8:43 a.m. London time.
2.S&P 500 futures rose 0.4%.
3.Nasdaq 100 futures rose 0.8%.
4.Futures on the Dow Jones Industrial Average were little changed.
5.The MSCI Asia Pacific Index fell 0.1%.
6.The MSCI Emerging Markets Index was little changed.
Currencies:
1.The Bloomberg Dollar Spot Index was little changed.
2.The euro fell 0.1% to $1.0730.
3.The Japanese yen was little changed at 158.24 per dollar.
4.The offshore yuan was little changed at 7.2840 per dollar.
5.The British pound was little changed at $1.2711.
Cryptocurrencies:
1.Bitcoin rose 1.5% to $65,822.57.
2.Ether rose 1.5% to $3,605.15.
Bonds:
1.The yield on 10-year Treasuries advanced three basis points to 4.25%.
2.Germany’s 10-year yield advanced two basis points to 2.43%.
3.Britain’s 10-year yield advanced three basis points to 4.10%.
Commodities:
1.Brent crude was little changed.
2.Spot gold rose 0.6% to $2,341.69 an ounce.
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