An index of global stocks climbed to its highest level in nearly a year yesterday while the British pound tumbled on the prospect of easing monetary policy in the country.
The sterling fell for the fifth day in a row after a Bank of England policymaker said the central bank will probably have to loosen monetary policy further if the UK’s economy worsens. The Bank of England cut interest rates last week for the first time since 2009 in the wake of the country’s vote to leave the European Union.
With bond yields low in developed economies as central banks maintain accommodative monetary policies, investors have sought equities for yield, particularly stocks with high dividend payouts.
“The dominant theme in global markets is low interest rates and liquidity and the support it provides for the stock market, for equities globally,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
“Every fearful drop in the global stock market has been met by this lack of alternatives and cheap cost of financing... It’s a ‘risk on’ when the world’s central banks have your back,” Mr Meckler said.
The Dow Jones industrial average rose 49.54 points, or 0.27 per cent, to 18,578.83, the S&P 500 gained 5.82 points, or 0.27 per cent, to 2,186.71 and the Nasdaq Composite added 20.89 points, or 0.4 per cent, to 5,234.03.
The Nasdaq and S&P 500 rose to fresh intraday records.
The pan-European FTSEurofirst 300 index gained 0.9 per cent, with Germany’s DAX surging 2.2 per cent, helped by well-received earnings reports from reinsurer Munich Re and telecoms group Altice.
MSCI’s all-country world index rose 0.6 per cent, and touched its highest level since late August of 2015.
The pound fell 0.4 per cent against the dollar and touched its lowest level in about a month.
“The pound is the big story today,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
Against a basket of currencies, the dollar fell 0.3 per cent after four days of gains. The greenback was 0.5 per cent weaker against the Japanese yen.
Oil prices dipped in choppy trade as forecasts for a weekly drop in US crude inventories were countered by worries of a stubborn global petroleum glut.
Brent crude fell 0.1 per cent to $45.33 a barrel, while US West Texas Intermediate crude slipped 0.2 per cent to $43.11 a barrel.
Longer-dated US Treasury prices edged higher yesterday as a weak report on US productivity suggested the economy may not be growing as quickly as anticipated.
Benchmark 10-year Treasury notes rose 6/32 in price to yield 1.5643 per cent.