Written by Amanda Cooper and Mark Jones
LONDON (Reuters) – Wall Street bulls continued a string of record highs for global stocks on Thursday after Europe cheered when Switzerland cut interest rates again and the Bank of England hinted it may start cutting interest rates soon as well.
US traders returned from a day off with chip giant Nvidia – which just surpassed Microsoft (NASDAQ:) as the world's most valuable company – pushing another 3% in early trading. (.n)
It was indeed an exciting day for Europe. The Bank of England kept UK interest rates at a 16-year high of 5.25%, but said the decision not to cut was “well balanced,” a formulation that economists took as a signal that an August cut was on the table.
The Swiss National Bank did not need to wait. It cut interest rates for the second time this year, sending the Swiss franc lower, while Norway's Norges Bank left interest rates unchanged, as expected.
An early rally on Wall Street brought the MSCI All-World Index to a new all-time high for the second straight day and brought its rise this year to nearly 11%.
In Europe, the British pound rose 0.5% near intraday highs, and the British pound fell 0.2% to $1.2688 against the dollar after the Bank of England. The price of the regional currency and the euro rose and fell respectively by almost the same amount.
The stars were aligning for a UK interest rate cut. Data this week showed that consumer price inflation fell to 2% for the first time since 2021 in May, although service sector price pressures and wage growth remain hotter than the Bank of England would like.
“The broader message is that inflation pressures are fading in the UK – a trend that policymakers have acknowledged,” said Dean Turner, head of global wealth management for the eurozone and UK economist.
“To avoid negative monetary policy tightening, the Bank will soon have to cut interest rates to keep pace with inflation on its way down, as it did on its way up. The Swiss National Bank’s decision to cut interest rates for a second time this morning demonstrates this broader trend and we expect the Bank of England to join the The discount cycle when it meets in August.
Dollar gains
With the pound sterling under pressure, the index, which measures the US currency against six other currencies, rose 0.2% to 105.39.
Gold, which tends to perform well in an environment characterized by low interest rates, rose 0.6 percent to $2,339 an ounce, after touching its highest levels since the beginning of June earlier.
A rise in technology stocks on Tuesday lifted artificial intelligence chipmaker Nvidia above Microsoft as the world's most valuable company, sparking a global rally in technology stocks.
With US markets closed for a holiday on Wednesday, early gains on Thursday lifted tech-heavy stocks 0.6% and rose 0.4% to an all-time high. (.n)
“Nvidia remains the hottest stock in the world,” Chris Weston, head of research at Pepperstone, said in a note.
However, Weston warned that index market breadth was weak, with participation disappointing, suggesting that the rally had been built on a shaky foundation.
“The fact remains that the market is now bullish on names associated with AI and big tech, and given there are no obvious immediate risks, the path of least resistance is rising stock index levels,” Weston said.
Investors are waiting for more data to give an idea of when the Federal Reserve may start cutting interest rates, after the US central bank expected last week to cut interest rates only once this year, and policymakers were cautious this week.
The Japanese yen reached its weakest level against the dollar since late April on Thursday, touching 158.41. Much of the decline in the currency's value was the result of the wide gap between Japanese and US interest rates.
In commodities, oil prices rose 0.3% to $85.32 a barrel, while prices for August delivery rose 0.1% to $80.77. (or)