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World stocks push for record high after bumper Fed cut

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Commodities cheer hopes of economic lift

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Bond markets take it all in their stride

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Sterling rallies has BoE holds rates, continues bond run

down

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Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, Sept 19 (Reuters) - Resurgent risk appetite

swept global financial markets higher from stocks and metals to

gold and oil on Thursday, after the U.S. Federal Reserve kicked

off its long-awaited interest rate cutting cycle with a half

point move.

Europe didn't seem to mind that the Bank of England opted

against a second cut in as many months and, with Wall Street

futures markets pointing to another round of record highs

shortly, the first Fed cut in four years was clearly uplifting.

The cut, and the prospect of more before the end of the

year, pushed MSCI's 47-country world stocks index

close to a record high too while Europe's main

bourses were all more than 1% stronger.

In currency markets, the dollar had largely overcome

its initial post-Fed dip. Gold was up while oil

and the industrial metals complex were stronger on the

view that lower rates equals stronger demand.

"The Fed delivered a very dovish rate cut. This bodes well

for risk assets," Brown Brothers Harriman Senior Markets

Strategist Elias Haddad said.

The U.S. central bank lowered its benchmark policy rate by

50 basis points to 4.75%-5%. It also dramatically cut the median

'dot plot' profile on where its rate setters expect rates to be

in future, though Fed chief Jerome Powell emphasized prudence.

"I do not think that anyone should look at this and say, oh,

this is the new pace," Powell told reporters after the half

point cut was announced.

"We're recalibrating policy down over time to a more neutral

level. And we're moving at the pace that we think is

appropriate, given developments in the economy."

In Europe, the dollar was off recent lows hit against the

euro, at $1.1157 and up 0.5% on the yen at 142.96 yen,

after climbing as high as 143.95. It couldn't fend off

high-flying sterling though, which was at its highest since

early 2022 and buying $1.33.

As well as keeping rates steady, BoE policymakers voted to

run down its QE-era stock of British government bonds by another

100 billion pounds over the coming 12 months.

Bond markets were recalibrating too after their recent busy

spell. Ten-year Treasury yields were just under 3.7%

compared with 4.7% back in April, while Europe's benchmark - the

10-year German Bund - was at 2.2%, a 1-1/2 week

high.

CUT OR COVER

It wasn't just all about the Fed and BoE. Norway's central

bank held its rates at a 16-year high but it signalled it might

cut them next year, while Wednesday saw Brazil, which has been

cutting its rates this year, raise them again.

In Asia overnight, the bulls drove Japan's Nikkei up

2.1% and stock markets in Australia and Indonesia

to record highs.

Expectations that the People's Bank of China will also ease

its policy rate on Friday helped too. Chinese bond yields dipped

again, the yuan hit a 16-month peak of 7.0640 against

the dollar, and Hong Kong's Hang Seng jumped over 2%.

One dampener was South Korea returning from a holiday with

heavy selling in chipmakers, after a downbeat Morgan Stanley

note that halved SK Hynix's ( HXSCF ) target price. SK Hynix ( HXSCF ) shares

tumbled 6% and Samsung fell 1.6%.

No such worries for commodity markets. Oil prices were up

over 1%, with benchmark Brent crude futures climbing

back above $74 a barrel for the first time in over a week and

U.S. crude at $71.50.

Bellwether global industrial metals copper, aluminum

and nickel all rose 1-1.4%.

The Bank of Japan will round out a bonanza week for interest

rate decisions on Friday. It is not expected to do anything this

meeting but, in stark contrast to the broader global trend, it

could line up another rate hike for as soon as October.