Global equity markets rallied yesterday, with the US benchmark S&P topping the 2,000 mark for the first time, as expectations grew that the European Central Bank would move to boost economic growth if inflation slows further.

The euro fell to near a one-year low against the dollar and yields on eurozone government debt fell to historic lows as investors took the view that ECB President Mario Draghi would use all available tools to foster growth.

In a landmark address to central bankers on Friday in Jackson Hole, Wyoming, Draghi suggested a major shift in ECB policy away from a focus on austerity toward reviving growth.

Speculation grew that the ECB was preparing a programme of asset purchases to counter wilting inflation when it meets next week, driving yields on bonds from Germany, France, Italy, Spain, Portugal, Ireland and elsewhere to all-time lows.

European stocks rallied, with many country and regional indexes climbing more than one per cent, and Wall Street followed. The S&P surged in a broad rally as advancing volume outpaced declining volume by about 2 to 1.

“European investors came in today with the mindset that we’re going to have a more supportive fiscal and monetary policy stimulus, and therefore we ought to see better times ahead in terms of economic growth and corporate earnings,” said Phil Orlando, chief equity market strategist at Federated Investors, in New York. “Europe is essentially driving the US,” he said.

The Dow Jones industrial average was up 77.00 points, or 0.45 per cent, at 17,078.22.

The Standard & Poor’s 500 Index was up 8.23 points, or 0.41 per cent, at 1,996.63.

The Nasdaq Composite Index was up 13.56 points, or 0.30 per cent, at 4,552.11.

In Europe, the FTSEurofirst 300 index of top regional shares rose 1.13 per cent to close at 1,366.61.

The London stock market was closed for a public holiday.

MSCI’s all-country world index gained 0.44 per cent.

The benchmark 10-year US Treasury note rose 2/32 in price to yield 2.3962 per cent, while European debt rallied. The 10-year German bund hit a record low of 0.926 per cent, before pulling back to yield 0.941 per cent.

The dollar rose as the euro dropped on weak German economic data and Draghi’s comments.

The euro skidded against the dollar to $1.3184 at one point after news that Germany’s Ifo business climate index fell to 106.3 from 108, its lowest since September 2013.

The euro was last trading at $1.3200, down 0.32 per cent on the day.

Brent crude traded just above $102 a barrel, while ample supply and weak demand dampened prices for US crude. Brent crude was unchanged at $102.29.

US crude was down 45 cents at $93.20 a barrel.

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