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Dollar softens as global stocks rise and Fed eases bets

Global equity markets rose on Thursday with Japanese shares reaching a new record high. Wall Street tech gains, positive earnings, hopes of a ceasefire agreement in Ukraine, and the expectation of U.S. interest rate cuts all contributed to the rise.

The markets largely shrugged off the latest tariffs by U.S. president Donald Trump, including a 25% additional tariff on U.S. imported goods from India due to purchases of Russian oil as well as a 100% threat on chips.

Eddie Kennedy, Marlborough's head of discretionary funds and bespoke fund management, said: "It is surprising that the market continues to melt up despite everything being thrown at it."

The STOXX 600 index in Europe rose by 0.5%. Major indexes from Frankfurt and Paris also increased, with gains of 1% and 0.8% respectively. The FTSE 100 in Britain was the exception, falling 0.3%.

The euro was also supported by the plans for a meeting to be held between U.S. president Donald Trump and Russian president Vladimir Putin regarding the conflict in Ukraine.

Barclays' head of European equity strategies, Emmanuel Cau said: "It would be a positive extra if there was a ceasefire."

It would be clear that if there was a deescalation it would be supportive. It is not the main driver, but it has definitely been an issue for Europe.

In Asia, Japan’s Topix broad index rose by 0.7%, reaching a new record high. The more tech-focused Nikkei gained about the same amount.

Taiwan's benchmark stock index soared up to 2.6%, reaching a record high of more than a year. The shares of chipmaker TSMC, who announced this year additional investments in their U.S. manufacturing facilities, soared by 4.9%, reaching a new record high.

South Korea's top Trade Envoy said that Samsung Electronics and SK Hynix will not be subjected to 100% tariffs.

Hong Kong's Hang Seng index rose 0.5% on the day, but mainland Chinese blue-chip indexes were only marginally higher. In offshore trading, the yuan strengthened slightly to 7,1819 dollars per yuan.

Futures for the U.S. S&P500 rose by 0.3%. The cash index rose 0.7% on Wednesday.

Capital.com analyst Kyle Rodda said in a recent note that Wall Street "seems to have gotten back its mojo".

There are still persistent downside risks. He said that the number of negative surprises in official statistics is increasing. "Valuations have also been stretched with the forward price-to-earnings hovering at its highest level in four years. "Trade uncertainty persists."

DOLLAR on the Back Foot

The U.S. Dollar remained lower on Thursday against major peers, as expectations of a more accommodative policy by the Federal Reserve were stoked by both some disappointing macroeconomic data - including Friday's payrolls survey - and Trump’s decision to install new Fed board members who are likely to share his dovish views about monetary policy.

The focus is on Trump's nominee to fill the upcoming vacancy in the Fed Board of Governors, and on candidates for the next Chair of the Central Bank. Jerome Powell's current tenure ends in May.

The benchmark yield on the 10-year U.S. Treasury was unchanged at 4.2365%. The yield on the two-year bond, which is sensitive to changes in expectations of interest rates, rose 1 basis point to 3.7134%. This was close to the three-month low reached on Monday, when it fell to 3.659%.

The dollar index (which measures the currency's value against the Euro, Sterling and four other counterparts) eased by 0.2%, to 98.031. This is a continuation of a 0.6% decline from Wednesday.

After a 0.7% increase in the previous session, the euro rose 0.2% to $1.1686,

The value of the sterling rose by 0.2%, to $1.3378.

The BoE is expected to lower interest rates on Thursday for the fifth consecutive time in the past 12 months. However, nagging concerns about inflation will likely split policymakers and cloud their outlook for future moves.

Two members of the Monetary Policy Committee may advocate for a rate reduction by a half point, while two others may argue for no change.

Spot gold rose 0.3% to $3.376 per ounce after hitting its highest level for two weeks.

(source: Reuters)