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Global stocks rose on Thursday as investors bet that a half-point interest rate cut by the Federal Reserve would help the world’s largest economy have a soft landing.
In Europe, the Stoxx Europe 600 index rose 1.4 percent, while the Cac 40 in Paris rose 2 percent and the FTSE 100 rose 1 percent.
Futures show US stocks will rebound on Thursday after falling in the previous session after the Fed decisionContracts tracking the S&P 500 rose 1.6 percent and contracts tracking the tech-heavy Nasdaq 100 gained 2.1 percent.
Japanese shares also rose, with the Topix up 2 percent, led by technology and exporter shares.
Before Wednesday’s cut, US interest rates were at their highest since 2001, part of a fedThe government’s efforts to lower inflation are at their highest in a generation.
But with consumer price inflation now at 2.5%, close to the Fed’s 2% target, the central bank has signaled more cuts are on the way.
Strategists at JPMorgan said the Fed chairman’s comments Jay Powell and officials’ expectations of a rate hike reaffirmed the “Goldilocks story and should be seen as positive for the economy and earnings.”
In the latest “dot plot” of officials’ forecasts, most expect another half-percentage point cut by year-end, to 4.25 percent to 4.5 percent. However, futures markets have priced in nearly three-quarters of a percentage point of the Fed cutting.
The yen fell 1 percent to 143.71 yen against the dollar on Thursday. Traders expect the Bank of Japan to keep interest rates unchanged at its policy meeting ending on Friday.
The pound rose 0.3 percent against the dollar to $1.325. Earlier, the pound rose above $1.33 to its highest since March 2022 after Bank of England kept interest rates unchanged at 5 percent on Thursday but signaled it could cut rates again in November.
The Australian dollar, Indonesian rupiah and Chinese yuan also gained against the greenback although the dollar index, which tracks the US currency against a basket of other currencies, was up 0.4 percent.
Bitcoin rose 4.5 percent to $62,933.
Economists say lower US interest rates could benefit emerging markets by reducing dollar funding costs and other borrowing costs.
Lower US bond yields also typically make assets from other countries more attractive.
“By cutting real interest rates and real yields on US dollar bonds, relatively speaking, emerging markets will outperform,” said Trinh Nguyen, senior emerging markets economist at Natixis.
