LONDON: Stock benchmarks hit new lifetime highs on Friday, buoyed by the prospect of interest rate cuts in the United States and Europe in coming months, with US jobs numbers the next data milestone ahead of Wall Street's open. As stocks scaled fresh peaks, bond yields and the dollar fell, while gold hit new highs for the fourth straight session.
While central banks on both sides of the Atlantic manage expectations of exactly when they will start lowering borrowing costs, investors pushed up the yen after reports that Japan's central bank may begin hauling rates from negative territory as soon as this month.
The dollar headed for its sharpest weekly drop of the year on the growing likelihood of lower borrowing costs. S&P 500 futures and Nasdaq futures were slightly weaker. Crude oil prices seesawed amid the market's scrutiny of rate cut timings. The MSCI All-Country stock index was up 0.2 per cent, hitting a new lifetime high of 774.95 points.
A year ago, investors were staring down the barrel of a US banking crisis and worries about credit, but since then tech stocks have pushed stock indexes to record highs on the back of an AI boom, said Patrick Spencer, Baird vice chair of equities. "You've got some very strong macro conditions, disinflation, the approaching monetary pivot, resilient earnings growth, and AI enthusiasm," Spencer said.
"Countering that you have unappealing technical developments where you've got some euphoric sentiment and frothy prices in tech, but I suspect as interest rates come down, the breadth of the market will widen," Spencer said.
In Europe, the STOXX index of 600 companies was slightly firmer after hitting a new lifetime high of 504.39. ECB policymaker Francois Villeroy de Galhau said there would be a rate cut in the spring, which he defined as from April until June 21, the date of the central bank's meeting that month.
German bund yields were on track to record their biggest weekly fall since mid-December on raised bets of an ECB cut in rates. The US Labor Department's closely watched jobs data at 1330 GMT is likely to show that growth in the jobs market slowed in February after two straight months of robust gains.
Non-farm payrolls likely increased by 200,000 jobs last month after surging 353,000 in January, according to a Reuters survey of economists. After the payrolls, attention will immediately turn to next Tuesday's US inflation report.
In Asia, expectations mounted that the Bank of Japan could finally exit negative interest rates this month. That lit a fire under the yen, lifting it to a one-month high against the dollar, and pushed domestic bond yields higher as well. The Nikkei closed up 0.23 per cent.
Elsewhere in Asia, Chinese blue chips rose 0.4 per cent and the Shanghai Composite Index gained 0.6 per cent. Both indexes were set to end the week with marginal gains. Hong Kong's Hang Seng Index rose 0.7 per cent.
Data on Thursday showed China's export and import growth in the January-February period beat forecasts, though that did little to turn battered sentiment around, as investors were left underwhelmed by the lack of details for strong stimulus from Beijing to shore up the country's economic recovery at this week's annual parliament session.
Hopes of rate cuts put downward pressure on US government bond yields, with the two-year US Treasury yield easing to 4.4881 per cent. The benchmark 10-year yield was last trading lower at 4.0730 per cent.
The dollar eased to a roughly two-month low against the euro , with the single currency last at $1.093. In commodity markets, Brent gave up earlier gains to ease 0.6 per cent to $82.45 a barrel, while US crude fell 0.7 per cent to $78.35 per barrel. Spot gold edged 0.4 per cent higher to $2,168 an ounce.
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