European Shares Set For Strong Opening On Dovish Fed Pivot
European stocks are seen opening sharply higher on Thursday as investors cheer dovish signals from the U.S. Federal Reserve.
The dollar sank after a dovish Fed policy shift led to a sharp decline in the U.S. Treasury bond yields.
The dot plot showed 75 basis points of reduction in 2024 – a sharper pace of rate cuts than indicated in September.
Investors now eye interest rate decisions from the European Central Bank, the Bank of England and the Swiss National Bank later in the day, will all three likely to keep interest rates steady.
In economic releases, U.S. reports on weekly jobless claims, retail sales and import and export prices will be in the spotlight.
Asian stocks followed Wall Street higher after the Fed flagged the end of its tightening cycle and struck a dovish tone for the year ahead.
Encouraging jobs numbers from Australia and core machinery orders data from Japan also underpinned sentiment.
Gold extended recovery after climbing more than 1 percent in the U.S. trading session overnight on plunging bond yields.
Likewise, oil extended gains from the previous session after data showed U.S. stockpiles fell from the previous week.
Middle East tensions remained on investors’ radar after a tanker attack in the Red Sea off Yemen’s coast.
Israel said the war against Hamas will continue with or without international support.
U.S. stocks closed higher overnight while benchmark slipped to their lowest level since August as the Fed confirmed plans to pivot to cutting rates next year, citing slowing inflation and economic growth.
The median forecast indicate rates will be lowered to 4.6 percent by the end of 2024, suggesting the Fed plans to cut rates by 25 basis points three times next year.
During his post-meeting press conference, Fed Chair Jerome Powell acknowledged that rate cuts will be a “topic of discussion” at upcoming meetings.
The Dow spiked 1.4 percent to a record closing high, while the Nasdaq Composite and the S&P 500 also gained about 1.4 percent to reach their best closing levels in almost two years.
European stocks ended mixed on Wednesday as investors digested muted U.S. producer price inflation and Eurozone industrial production data and looked ahead to the FOMC policy decision.
The pan European STOXX 600 finished marginally lower. The German DAX and France’s CAC 40 both slipped around 0.2 percent while the U.K.’s FTSE 100 ended flat with a positive bias.
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