Stocks, bonds and commodities showed signs of fatigue yesterday, having been driven higher by signs that softening US inflation could see the Federal Reserve keeps its interest rates lower for even longer.

MSCI’s 47-country All World share index was at its latest record high as Wall Street looked set for its own fresh peak and after Asian stocks had jumped to their highest in almost a decade.

European bourses struggled in comparison, eking out only the smallest of gains, as a lung cancer drug test failure sent pharmaceutical giant AstraZeneca sliding 16 per cent and disappointing Deutsche Bank results push its shares down 3.5 and weighed on Germany.

The broader rush for risk was still intact though, coming after the Fed left US rates unmoved as expected but tweaked its wording on inflation.

The market seized on the fact that the central bank noted that both overall and core inflation had declined and removed the qualifier “recently,” perhaps suggesting concerns the slowdown might not be temporary.

The Fed also said it expected to start winding down its massive holdings of bonds “relatively soon”, cementing expectations of a September start.

While that would be an effective tightening in financial conditions, it might also lessen the need for actual hikes in rates, which matter more for currency valuations.

The euro, which had been bumping up against a 23-month top for most of the week, finally broke through to reach as far as $1.1777, its highest since early 2015, before the urge to take profit kicked in Europe.

Weaker-than-expected ECB lending data also weighed and the euro was last buying $1.1707 with the next major upside target the 200-week average at $1.1807 – a measure it has not traded above since mid-2014.

The dollar was also gradually clawing up against the yen, climbing to 111.39 yen per dollar having been as low as 111.03 yen, that despite expectations the Bank of Japan will keep its super-easy policies in place longer than most other global central banks.

The Dow had ended Wednesday up 0.45 per cent, while the S&P 500 added 0.03 percent and the Nasdaq 0.16 per cent.

Futures markets pointed to further modest gains when trading resumed in New York yesterday.

The declining greenback boosted commodities priced in dollars. Gold hit a six-week high and was last trading at $1,261.80, while copper reached $6,400 a tonne, territory not trodden since May 2015.

Oil prices paused near eight-week highs after a surprisingly sharp drop in United States inventories encouraged speculation that a global crude glut would recede.

A bout of profit-taking saw Brent crude futures ease seven cents to $50.90 a barrel, while United States crude dipped five cents to $48.70.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.