NEW YORK, May 10 ― World stocks rallied yesterday, led by surging European shares and a larger-than-expected rise in US weekly jobless claims that buoyed interest rate cut hopes, while the dollar eased as the market awaits key inflation data next week.
The pan-European STOXX 600 and Britain's FTSE 100 rose 0.19 per cent and 0.33 per cent, respectively, to scale new record highs, after the Bank of England kept rates unchanged but suggested a cut is imminent. Germany's DAX also hit a peak.
Following a sluggish open, the major US indices pulled higher with the Dow industrials rising for a seventh straight session. New signs of a softening labour market provided hope the Federal Reserve might cut rates as soon as September.
US initial claims for state unemployment benefits increased more than expected by 22,000 to a seasonally adjusted 231,000 for the week ended May 4, the Labour Department said.
“It's a relatively quiet week, but initial jobless claims came in weaker. We're still clearly in that 'bad news is good news' macro regime,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management in Boston.
“We'll have to see if that's the beginning of a trend. That is one of the biggest jumps we've seen in quite a while.”
The combination of earnings coming in better than expected and interest rates falling is propelling US stocks, said James Ragan, director of Wealth Management Research at DA Davidson in Seattle.
“There's a feeling that aggressive earnings estimates for the year are more achievable after having a pretty good first quarter season,” Ragan said. “The Fed has made it very clear that the next move is going to be lower, it's just a matter of the timing on that.”
MSCI's gauge of stocks across the globe closed up 0.38 per cent. The Dow Jones Industrial Average advanced 0.85 per cent for its seventh straight day of gains. The S&P 500 gained 0.51 per cent and the Nasdaq Composite 0.27 per cent.
In Britain, investors cheered indications more policymakers are warming to cutting rates. Two of BoE's nine rate setters, one more than in April, voted for a cut and Governor Andrew Bailey said more could be on the way than investors expect.
The BoE sent a message that bets on the first cut being in August might be too conservative as it lowered its inflation forecasts for two and three years' time to 1.9 per cent and 1.6 per cent ― below its 2 per cent target ― from its February projections of 2.3 per cent and 1.9 per cent.
The dollar index, a measure of the US currency against a basket of six others, including the yen and the euro, fell 0.28 per cent to 105.22. The euro rose 0.34 per cent to US$1.0781 (RM5.12) and the yen fell 0.09 per cent to 155.420 per dollar.
Sterling rebounded to strengthen 0.2 per cent at US$1.2521.
Benchmark Treasury yields retreated on relief that all US$125 billion in new note and bond supply this week was absorbed smoothly.
The yield on benchmark 10-year Treasury note fell 2.4 basis points to 4.459 per cent, while the two-year note's yield, which typically moves in step with interest rate expectations, fell 3 basis points to 4.8133 per cent.
Bulls in the China shop
Overnight in Asia, Chinese trade data and some property market developments had helped Chinese stocks continue their recent outperformance. MSCI's dollar-denominated China index has jumped more than 13 per cent over the past two months.
Customs figures showed that China's imports jumped 8.4 per cent in April from a year earlier, beating expectations for a rise of 4.8 per cent, while exports returned to growth, meeting forecasts, in a boost to economic growth.
That helped Chinese shares build on earlier gains, with blue-chip stocks ending up almost 1 per cent and Hong Kong's Hang Seng index increasing 1.2 per cent. News that China's eastern metropolis Hangzhou will lift all home purchase restrictions in the ailing property sector, a key pillar of domestic demand, also boosted sentiment.
Property shares surged 2.5 per cent as a result.
In other markets, Japan's Nikkei reversed earlier gains to finish down 0.3 per cent. Australia's resources-heavy share market lost 1.1 per cent while South Korea also retreated 1.2 per cent.
US crude settled up 27 cents at US$79.26 a barrel and Brent rose 30 cents to US$83.88 a barrel.
Gold prices rose more than 1 per cent after the new unemployment claims data reinforced rate cut bets.
US gold futures for June delivery settled 0.8 per cent higher at US$2,340.30 per ounce. ― Reuters
