European shares have hit a record high but bond markets are back under pressure as traders turn their focus to global interest rates after days of trade war angst.
Britain’s pound was sliding ahead of a widely-expected Bank of England rate cut, but Europe’s shares were buoyant again as encouraging earnings from drugmaker AstraZeneca and miners helped the STOXX 600 up 0.7 per cent.
Wall Street was similarly poised, with S&P 500 futures and Nasdaq futures gaining more than 0.2 per cent each.
Amazon’s earnings are due later, with pressure on for it to deliver on lofty expectations for cloud computing after lacklustre reports from Microsoft and Alphabet this week.
Ahead of the Bank of England’s expected rate cut, Royal London’s Head of Rates and Cash, Craig Inches, said the broader market barometer had swung back to worrying about global growth in the last couple of weeks.
That has caused a “washout” for those betting against bonds and leaves plenty of interest in what BoE chief Andrew Bailey will say later.
“What we are looking for clues on from Bailey is whether what we have got priced in is in line with his thinking, or have we gone too far?” Inches said.
Though uncertainties remain about US President Donald Trump’s plans for global trade, the economy and diplomacy, markets seem for the most part relieved that things haven’t been worse, particularly with regard to tariffs.
China’s central bank again set a stronger-than-expected yuan midpoint fixing overnight, though the currency still weakened after Beijing sought the World Trade Organisation’s intervention to rule on Trump’s latest 10 per cent tariffs on Chinese imports.
The onshore yuan last stood at 7.2845 per dollar, while its offshore counterpart eased 0.05 per cent to 7.2862. Meanwhile, China’s CSI300 blue-chip index jumped more than one per cent.
“Chinese authorities at this stage are not indicating or showing any intention of weakening the yuan as part of the response to the tariffs. I think that has definitely helped to calm the market down,” said Khoon Goh, head of Asia research at ANZ.
Global government bond yields – a proxy of what countries pay to borrow – were rising again in Europe after falling to one-month lows in recent sessions.
US Treasury Secretary Scott Bessent said on Wednesday that while Trump wanted lower interest rates, he would not ask the Federal Reserve to cut rates.
Bessent also said that he and Trump were intently focused on the 10-year Treasury yield.
“Certainly those comments were interesting, and perhaps a little surprising, though (they) likely suggest that Bessent is having something of a moderating influence on Trump,” said Michael Brown, senior research strategist at Pepperstone.
In currencies, the dollar was also on the rise again, up 0.4 per cent against a basket of major currencies despite touching an eight-week low against the yen after the Bank of Japan’s Naoki Tamura advocated continued interest rate hikes.
The euro fell 0.5 per dent to $1.0359, while the looming Bank of England cut pushed sterling down 0.6 per cent to $1.2427.
The BoE’s benchmark Bank Rate currently stands at 4.75 per cent, the highest among the large rich economies.
Thursday’s widely expected quarter-point cut would bring it to the same level as in Norway and close to the US Federal Reserve’s 4.25-4.5 per cent range.
In commodities, oil prices rose, steadying from a sell-off the previous day after Saudi Arabia’s state oil company sharply raised March oil prices.
US crude edged 0.42 per cent higher to $71.33 a barrel, while Brent crude rose 0.31 per cent to $74.84 per barrel.
Gold eased a touch from a record peak on Wednesday and was last at $2,860.11 an ounce.
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