Global stocks rose on Thursday after the Federal Reserve underscored its wish to maintain support for the economic recovery from Covid-19.
European stocks edged up with the UK’s FTSE 100 rising 0.4% after its mid-cap equivalent, the FTSE 250, hit a record high on Wednesday. The Europe Stoxx 600 regional index also rose 0.4%.
US government bonds were flat, with the 10-year note yield hovering around 1.66 percent. Bond markets have suffered from strong selling in recent months as investors fear the Fed’s ultra-loose monetary policy will boost the economic recovery from the pandemic and trigger inflation. Some investors still expect the Fed to tighten policy sooner than expected.
The minutes of the central bank policy meeting, released on Wednesday, showed that Fed policymakers were largely optimistic about the chances of a sustained rebound in inflation and vowed to maintain an easy policy until Jobs recovers from its pandemic.
“These big mental readjustments by the market looking at the outlook for growth and what that would mean for inflation have been fully digested,” said April LaRusse, Fixed Income Specialist at Insight Investment.
The S&P 500 closed at a new high after the Fed reading, breaking a blue chip index record set on Monday.
“After a record rally in global stocks over the past year, we are seeing slowing progress from here. Unlike last November, stocks are no longer lagging behind [behind] the strong flow of economic news, ”warned Matthew Garman, equity strategist at Morgan Stanley.
Stock traders have not been affected by the announcement of sweeping reform international corporate taxation proposed by the Biden administration which could see heavy tax bills for some multinationals.
Samy Chaar, chief economist at Lombard Odier, said pressure on profits from tax increases would be offset by the high level of stimulus stimulating demand. “If what’s happening on the fiscal front results in more spending, that will be seen as a net positive in the end,” he said.
Tobias Levkovich, chief U.S. equity strategist for Citi, said investors were overly optimistic about the prospect of tax increases.
“Sentiment is in very worrying territory, as is valuation, but cash flows continue to push indices higher. Huge fiscal stimulus and central bank support have created the notion that you don’t have to be risk-averse, ”Levkovich said.
Asian stock markets were largely in positive territory, with Hong Kong’s Hang Seng adding 1.1 percent. Australia’s S&P ASX 200 added 1 percent while China’s CSI 300 was up 0.2 percent. Japan’s Topix lost 0.8 percent.