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Fed cuts bets, pound gains after BoE; global stocks rise as hopes of a ceasefire in Ukraine are raised

Global equity markets rose on Thursday with Japanese shares reaching a new record high. Positive earnings, a growing hope for a ceasefire to be reached in Ukraine, and the expectation of a rate cut by the U.S. boosted sentiment.

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

STOXX 600 in Europe rose by 1%. Major indexes of Frankfurt and Paris were up 1,7% and 1.3% respectively. The FTSE 100 in Britain was the exception, falling 0.8%, after the Bank of England lowered rates, but only on a divided vote. Four people voted to keep the rates the same.

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: "A ceasefire would be a positive extra."

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."

Futures for the U.S. S&P500 rose by 0.7%. 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."

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

Taiwan's benchmark stock index jumped 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, are expected to be relatively unaffected by the U.S. import tariff. They soared 4,9% to 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 by 0.7% on the day, but mainland Chinese blue-chips were only marginally higher. In offshore trading, the yuan strengthened slightly to 7,1832 dollars per yuan.

DOLLAR STEADY; STERLING JUMPS ABOARD BOE

The U.S. Dollar was stable against major peers following its recent fall, on expectations of easier policies from the Federal Reserve. This expectation was stoked by both some disappointing macroeconomic reports - including Friday's payrolls data - 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 up by 1.5 basis points to 4.2461%. The yield on the two-year bond, which is sensitive to changes in expectations of interest rates, rose 2 basis points to 3.7258%. However, it remained close to Monday's three-month-low of 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.

The euro was unchanged at $1.1653, after the previous session's 0.7% increase.

The BoE's decision to lower interest rates was met with a divided response. Sterling rose by 0.5% to $1.3412

Concerned about the inflation rate, four of the nine members of the Monetary Policy Committee voted to maintain the rates.

Dominic Bunning is the head of G10 FX Strategy at Nomura.

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

The price of crude oil recovered from five days of losses, although it did not recover all of its earlier gains. This was after the Kremlin announced that Trump and Putin would meet.

Brent crude futures rose 0.6% at $67.29 a barrel, while U.S. West Texas intermediate crude rose 0.6% to $64.73.

(source: Reuters)