A leading global stock index hit an all-time high and bond prices rose yesterday a day after the Federal Reserve lowered its forecast for target US interest rates in the long term, an outlook that lifted risk appetite around the world.
Stocks on Wall Street fell slightly after the benchmark S&P 500 surged to a new record on Wednesday when the Fed expressed confidence the US economic recovery was on track.
Stocks in Europe rose to new six-year highs after equities in Asia posted strong gains, while US Treasuries yields fell to two-week lows on the Fed’s more dovish tone following a meeting of the central bank’s policy-makers.
The dollar sank to three-week lows as many traders had expected the Fed to take a more hawkish stance because of recent signs of a pick-up in price pressure.
The bond market is ignoring the Fed’s lowered projections for growth and what the outlook for unemployment says, which is a reason to be cautious, said David Kelly, chief global strategist for JPMorgan Asset Management.
“A lot of money in short-term accounts needs to be put to work, and that is helping both the bond market and stock market. The stock market is doing well because the bond market did not react in any negative way to what the Fed said,” Kelly said.
MSCI’s all-country world index n all-time high set in November 2007.
In Europe, the FTSEurofirst 300 index of regional shares rose 0.59 per cent to close at 1,395.58 points after earlier touching a six-year high.
The Dow Jones industrial average fell 25.15 points, or 0.15 per cent, to 16,881.47.
The S&P 500 lost 1.79 points, or 0.09 per cent, to 1,955.19 and the Nasdaq Composite dropped 11.291 points, or 0.26 per cent, to 4,351.545.
Benchmark 10-year notes rose 2/32 in price to yield 2.6079 per cent.
In Europe, peripheral eurozone bond yields headed back towards historic lows. German bund futures ticked up 68 points to settle at 146.14.
The greenback touched a three-week low against a basket of currencies at 80.147. The euro strengthened to a 10-day high against the dollar, while sterling advanced to its highest level versus the greenback since October 2008.
The euro gained 0.13 per cent to $1.3812, while the dollar fell 0.03 per cent to 101.88 yen.
Brent crude hit a nine-month high above $115 a barrel on concerns heavy fighting in Iraq could limit oil supply from Opec’s second-biggest producer.
Brent was up 80 cents at $115.06 a barrel.
The US crude oil futures contract for July, which expires today, rose 23 cents at $106.20 a barrel.