Global and U.S. markets are currently riding a wave of optimism, fueled by the Federal Reserve's reaffirmation of potential interest rate cuts later this year. Adding to the excitement, the Swiss National Bank (SNB) has unexpectedly reduced its main policy rate to 1.5%, marking its first rate cut in nine years and significantly lowering inflation forecasts.
This move by the SNB led to a more than 1% drop in the Swiss franc against the dollar, simultaneously boosting Swiss stock indexes by over 1%. Meanwhile, the Bank of England's upcoming decision is highly anticipated for any dovish signs, especially after UK inflation figures fell short of expectations.
Contrastingly, Norway's central bank has hinted at postponing any easing measures until autumn, slightly tempering market enthusiasm. However, the overarching narrative remains positive, with central banks' dovish stances igniting rallies across stock and bond markets globally.
Notably, MSCI's all-country stock index hit new record highs, propelled by record-setting performances in the S&P500 and Nasdaq. Asian markets, including Japan's Nikkei, South Korea's Kospi, and Taiwan's benchmark, witnessed gains exceeding 2%, with European indexes also jumping more than 1%.
The bond market has seen a significant uptick, with 2-year U.S. Treasury yields dropping nearly 20 basis points since Monday, now standing at 4.57%. This market optimism stems from the Fed's projections, maintaining its December forecast for 75 basis points of rate cuts this year, aiming to bring the PCE inflation gauge back to its 2% target by next year.
Despite some cautionary signals indicating a possible uptick in the median policy rate projections for the coming years, the overall sentiment remains bullish, with futures markets increasingly betting on a Fed rate cut as early as June.
In currency markets, the dollar's trajectory has been mixed, initially dipping post-Fed announcement but rebounding following the SNB's rate cut. The euro and yen have shown varied performances, with the yen weakening against the dollar following the Bank of Japan's decision to exit negative interest rates.
On the corporate front, Micron Technology (MU, Financial) shares surged 16% after forecasting higher-than-expected revenue for the third quarter, buoyed by a spike in artificial intelligence adoption. Meanwhile, U.S. Congress is in a race against time to pass a significant spending bill to prevent a partial government shutdown.
Looking ahead, several key events could influence U.S. market directions, including policy decisions from various central banks, business surveys from the U.S. and Europe, weekly jobless claims, and speeches from Federal Reserve officials.
