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The S&P hit a record high of 5,713.02 on Thursday as global stocks rose in the aftermath of this week’s jumbo half-point Federal Reserve rate cut.
As investors bet that lower borrowing costs would help deliver a soft landing for the world’s largest economy, the S&P jumped 1.7 per cent to a new intraday peak just after opening before edging back. The tech-heavy Nasdaq Composite added 2.3 per cent.
The US central bank’s decision also buoyed international stocks earlier in the day.
The Stoxx Europe 600 index rose 1.4 per cent, while the Cac 40 in Paris was up 2 per cent and the FTSE 100 up 1 per cent. Japanese stocks also rose, with the Topix up 2 per cent, led by tech stocks and exporters.
Before Wednesday’s cut, US rates had been at their highest since 2001, part of the Fed’s bid to bring down inflation from the biggest surge in a generation.
But with consumer price inflation now at 2.5 per cent, close to the Fed’s 2 per cent target, the central bank has signalled more reductions to come.
Strategists at JPMorgan said comments by Fed chair Jay Powell and officials’ revised interest rate expectations reaffirmed a “Goldilocks narrative and should be viewed as positive for the economy and earnings”.
In the latest “dot plot” of officials’ forecasts, most expected the rate to fall another half-percentage point by the end of the year, to 4.25 per cent to 4.5 per cent. However, futures markets were pricing in that the Fed would make nearly three-quarters of a percentage point of cuts.
The yen weakened 0.7 per cent to ¥143.50 against the dollar on Thursday. Traders expect the Bank of Japan to hold rates steady at a policy meeting concluding on Friday.
Sterling was up 0.2 per cent against the dollar at $1.341. It had earlier climbed above $1.33 to its highest level since March 2022 after the Bank of England held interest rates at 5 per cent on Thursday but signalled it may cut rates again as soon November.
The Australian dollar, Indonesian rupiah and Chinese renminbi also strengthened against the greenback although the dollar index, which tracks the US currency against a basket of peers, was up 0.3 per cent.
Bitcoin jumped 5.1 per cent to $63,300.
Economists maintain that lower US interest rates can benefit emerging markets by reducing the cost of dollar financing and other borrowing costs.
Lower rates on US bonds can also often make assets from other countries more attractive.
“By slashing real rates and real returns on US dollar bonds, relatively speaking emerging countries are going to do better,” said Trinh Nguyen, senior emerging Asia economist at Natixis.
