Global stocks rallied on Thursday, pushing further into record territory, after the US Federal Reserve underscored its commitment to support the recovery in the world’s largest economy.
Technology was the leading sector within the benchmark S&P 500, helping the blue-chip index close 0.4 per cent higher in New York, adding to the record high set a day earlier. Wall Street’s tech-heavy Nasdaq Composite, which is full of growth stocks whose valuations are flattered by lower interest rates, climbed 1 per cent.
Investors looked past an increase in new US jobless claims that came in higher than anticipated, marking the second consecutive week of rising figures. The weekly data highlighted the uneven path to recovery in the labour market after non-farm payrolls last week showed the US economy added 916,000 jobs in March, exceeding economists’ expectations.
Charles Hepworth, investment director at Gam Investments, said markets were likely to become less focused on jobless claims “as the vaccine rollout continues at pace and the expectation is that companies will rehire lost labour as the economy becomes less constricted by virus restrictions”.
GameStop shares whipsawed after the US retailer named Ryan Cohen, its largest shareholder who is popular among the company’s fans on Reddit, as its next chair. The shares popped at the opening bell but then dropped to trade 4.3 per cent lower for the day.
Thursday’s rise in tech stocks follows a modest rally in US Treasuries that has taken the yield on the 10-year note from a 14-month high of 1.77 per cent in March to about 1.62 per cent. It has stalled the heavy selling in recent months as investors worried that the Fed’s ultra-loose monetary policy, alongside $1.9tn of fiscal stimulus, would supercharge the economic recovery from the pandemic and unleash inflation.
Minutes from the central bank’s policy meeting, released on Wednesday, showed Fed policymakers were largely sanguine about the chances of a sustained rebound in inflation and committed to keep policy easy until employment recovered from its pandemic hit.
“Those big mental readjustments by the market contemplating the growth outlook and what that would mean for inflation have been fully digested,” said April LaRusse, head of investment specialists at Insight Investment.
Europe’s Stoxx 600 index closed up 0.6 per cent, pushing it above the record set on Tuesday that wiped out its pandemic losses. The UK’s mid-cap FTSE 250 index hit its second high this week, climbing 0.4 per cent, while its larger peer, the FTSE 100, ended the session up 0.8 per cent.
Gold climbed more than 1 per cent to $1,756 per troy ounce, a one-month peak, while the US dollar dipped 0.5 per cent against a basket of big currencies.
Stock traders were unmoved by news of a sweeping reform to international corporate taxation proposed by the US administration that could lead to hefty tax bills for some multinationals.
Samy Chaar, chief economist at Lombard Odier, said the squeeze on earnings from tax rises would be counterbalanced by the high level of stimulus boosting demand. “If what happens on the tax front results in more spending, it will be seen as a net positive in the end,” he added.
Asian bourses closed largely in positive territory on Thursday. Hong Kong’s Hang Seng added 1.2 per cent, Australia’s S&P ASX 200 climbed 1 per cent and China’s CSI 300 advanced 0.2 per cent. Japan’s Topix shed 0.8 per cent.