European stocks rose Friday after an overnight rally on Wall Street as signs of an end to the Federal Reserve’s interest rate tightening policy pushed some of the world’s biggest tech stocks to all-time highs.
Europe’s regional Stoxx 600 gained 0.4% at the open, while France’s Cac 40 and London’s FTSE 100 both gained 0.5%.
Overnight on Wall Street, the benchmark S&P 500 and the tech-heavy Nasdaq Composite both closed up 1.2% as economic data showed signs of easing in the labor market. and moderation of consumer spending. Investors took the data as a sign that the central bank might need to make fewer rate hikes to get inflation under control. Apple and Microsoft have hit records.
Japan’s Topix index gained 0.3% after the Bank of Japan kept its overnight interest rate at minus 0.1% as expected, even though inflation was above the target for 2% from the central bank.
The yield on the country’s benchmark 10-year government bond held steady at 0.4% after the announcement, while the central bank said it would continue to allow it to fluctuate by 0.5 percentage points above or below the target return of zero.
Elsewhere in Asia, China’s CSI 300 rose 1% and Hong Kong’s Hang Seng index gained 0.9%. Contracts following the S&P 500 and the Nasdaq Composite were flat ahead of the New York open.
Earlier in the week, the US Federal Reserve held the federal funds rate steady within a target range of 5-5.25%, marking the central bank’s first pause in more than 14 months.
Still, the move came with a hawkish message from the Fed, which said it expected two more rate hikes this year. Investors have put a 69% chance that U.S. policymakers will make another quarter-point hike at their next meeting in July, according to Refinitiv data.
Both the yen and the pound strengthened against the dollar, with the yen hitting $1.41, its highest level since November, and the pound touching $1.28, its highest level since April last year.
The yield on two-year U.S. Treasury bills rose 0.05 percentage points to 4.7% on Friday. The yield on the benchmark 10-year note rose 0.03 percentage points to 3.76%. Bond yields rise as prices fall.
On Thursday, the European Central Bank took a more hawkish move than the Fed, raising its deposit rate by 0.25 percentage points to 3.5%, its highest level since July 2001.
The bank announced further monetary tightening ahead, predicting that inflation would not return to its 2% target for two years.
