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US and European stocks rise after central banks tighten monetary policy

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US and European stocks rose in choppy trade on Thursday after strong gains in the previous session as traders weighed developments in Ukraine and central bank moves to tighten monetary policy.

Wall Street’s broad-based S&P 500 stock gauge had its best close in about a month, ending the day up 1.2%, after gaining more than 2% on Wednesday. The tech-heavy Nasdaq Composite gained 1.3%, the highest close since early March.

In Europe, the regional Stoxx 600 index closed up 0.4% after rising 3.1% in the previous session. London’s FTSE 100 gained 1.3%.

The moves came after the Bank of England raised borrowing costs on Thursday. The BoE’s policy decision followed an interest rate hike by the Federal Reserve a day earlier, the first increase since the U.S. central bank cut rates to zero at the start of the pandemic.

The BoE’s monetary policy committee voted eight to one to raise interest rates by 0.25 percentage points to 0.75% and predicted that inflation should reach 8% by the end of June.

Following the move, the yield on the UK 10-year gilt fell 0.07 percentage points to 1.56%, while the yield on the shorter-dated two-year gilt lost 0.12 percentage points. percentage at 1.27%. Bond yields move inversely to their prices.

Charles Hall, head of research at investment bank Peel Hunt, said the BoE’s inflation forecast looked optimistic given food and energy prices could rise if the war in Ukraine erupts. continued for months. “A lot of this inflation is supply-side, but the bank had to do something. [The interest rate rise] is quite in the middle of the road, there were no fireworks today,” he said.

The Fed on Wednesday raised its main interest rate by a quarter of a percentage point, in line with market expectations, in a bid to combat rising inflation which is expected to be further stoked by the invasion of the Ukraine by Russia.

The Fed’s initial rate hike was “a little lukewarm” and unlikely on its own to do much to lower inflation, said Joost Van Leenders, senior portfolio manager at Kempen Capital Management.

“The most important signal” has been the central bank indicating that rates will rise at each of its next six policy meetings this year, he said, “showing that they are serious about solving the problem. inflation problem.

The yield on the 10-year U.S. Treasury note rose 0.02 percentage points on Thursday to 2.2% after briefly hitting a nearly three-year high the previous day.

In Asia-Pacific stock markets, Chinese stocks rallied for a second day after Beijing pledged measures to support the economy. Hong Kong’s Hang Seng index jumped 7%, while the CSI 300 index of stocks listed in Shanghai and Shenzhen rose nearly 2%.

China’s Committee for Financial Stability and Development on Wednesday pledged “substantial measures” to support growth and signaled further support measures. Worries over the country’s growth outlook had caused double-digit falls earlier in the week.

“Policymakers will likely follow suit,” said Xiangrong Yu, chief China economist at Citigroup. Yu pointed to statements by a slew of leading institutions, including the People’s Bank of China and the banking and insurance regulator, all of which pledged to implement the new measures.

But Yu added that there were “significant headwinds for growth”, including signs of weakness in China’s property market and an increase in Covid-19 cases.

On the commodity markets, the price of Brent rose 8.8% to 106.64 dollars a barrel. The international oil benchmark had approached $140 a barrel at the start of the month before falling sharply.