NEW YORK – World stock indexes jumped and the Nasdaq hit a record high on Thursday while bonds rallied, a day after the Federal Reserve signaled an increasingly cautious approach to future United States rate increases.
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The BOJ said on Wednesday it will seek to guide the 10-year JGB yield around zero per cent in an unprecedented move but investors are left wondering exactly where and how the BOJ would be able to exert control on the bond yield.
The Dow Jones industrial average rose 120 points, or 0.7 percent, to 18,414 as of 12:45 p.m. The tech-heavy Nasdaq Composite Index advanced 44 points, or 0.8%, to close at 5,339 after touching an intra-day record of 5,342.88.
The S&P technology sector provided the biggest boost to the benchmark index, rising 0.54 percent to its highest level in more than one week.
Phone companies, another group of high dividend payers, also climbed. London closed up 1.1 per cent, mining giant Glencore leading the way with a 5.5 per cent rise, while Frankfurt and Paris were in lockstep as both added 2.3 per cent in value.
Trading followed a pattern that has become familiar in the last several months.
The week’s gains (http://www.marketwatch.com/story/european-stocks-climb-as-fed-inspires-risk-taking-2016-09-22) came as the U.S. Federal Reserve refrained from raising interest rates and indicated it would keep monetary policy loose for at least another few months.
For the year, the benchmark S&P 500 is up about 6 percent.
“It’s another example of the issues facing investors right now, particularly pension funds and retirement funds, that they are all chasing yield in the same places”, said Ian Winer, co-head of equities trading at Wedbush Securities.
Government bonds in Europe also rallied Thursday.
“There’s plenty of data that doesn’t support the market here, but what else are you going to invest in?” he said.
Concerns over whether the Fed would raise rates prompted a return of stock market volatility in recent weeks after two months of calm.
The Canadian dollar staggered 0.8 cents at 75.87 cents U.S. The yield on the 10-year German bund fell to minus-0.085%, off last week’s peak of 0.071%, according to Tradeweb.
The yield on the U.S. Treasury 10-year note fell to 1.61 percent from 1.67 percent the day before.
Oil prices rallied to a two-week high on Thursday, helped by USA government data that showed a surprising crude inventory drop.
On the other hand, the Chicago Fed National Activity Index fell to negative 0.55 in August compared with revised 0.24 in July.
Crude oil prices slumped on Friday after the Fed made moves to curtail banks’ involvement in the commodities market.
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Put another way, it is going to take even more monetary gas than they expected to drive the USA economy to the Fed’s forecast for 2 percent growth, 4.5 percent unemployment and 2 percent inflation by 2018.
