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Stocks climb, U.S. yields fall on central bank pause hopes

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A gauge of global stocks rallied and U.S. Treasury yields mostly fell on Thursday, as policy announcements from a string of central banks fueled optimism that interest rate hike cycles may be nearing an end.

After the U.S. Federal Reserve raised rates by 25 basis points (bps), as was widely expected, on Wednesday, markets rallied following comments from Fed Chair Jerome Powell acknowledging the “disinflationary” process may have begun.

The European Central Bank (ECB) and Bank of England (BoE) hiked by 50 basis points each on Thursday, with the BoE signaling the tide was turning against inflation and the ECB indicating at least one more hike was on the horizon.

On Wall Street, the S&P 500 and Nasdaq climbed, with the S&P 500 touching its highest intraday level since Aug. 26 and the Nasdaq hitting its highest since Sept. 12, getting an additional boost from a 24.24% surge in Facebook parent Meta Platforms Inc (META.O) following its quarterly results and $40 billion buyback announcment.

“Central banks are in data-dependant mode, but that means that they’re no longer in control and so markets are basically leading the central banks at the moment,” said Mazen Issa, senior FX strategist at TD Securities in New York.

“It sounds like they may be nearing a pause. That doesn’t necessarily mean that they’ll be cutting rates immediately, but it means that its going to be much more difficult to price in higher rates from here, at least for now.”

The Dow Jones Industrial Average (.DJI) fell 93.99 points, or 0.28%, to 33,998.97; the S&P 500 (.SPX) gained 59.88 points, or 1.45%, to 4,179.09; and the Nasdaq Composite (.IXIC) added 351.13 points, or 2.97%, to 12,167.45.

On the economic front, weekly initial jobless claims dropped to a nine-month low, showing the labor market remains strong, while worker productivity in the fourth quarter accelerated. Investors will eye the January payrolls report on Friday for further signs of labor market strength.

After the closing bell, investors will see earnings from heavyweights Apple Inc (AAPL.O) and Inc (AMZN.O)

European stocks rallied, with the STOXX 600 poised for its biggest one-day percentage gain in a month after hitting its highest intraday level since late April.

The pan-European STOXX 600 index (.STOXX) rose 1.37% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 1.21%.

Benchmark 10-year notes were down 4 basis points to 3.358%, from 3.398% late on Wednesday.

The dollar bounced, however, from its biggest one-day percentage drop in nearly a month on Wednesday, while the euro also weakened following the ECB announcement.

The dollar index rose 0.594%, with the euro down 0.59% to $1.0924.

The Japanese yen strengthened 0.44% versus the greenback at 128.39 per dollar, while Sterling was last trading at $1.2269, down 0.86% on the day.

In commodities, oil prices slipped, with U.S. crude recently falling 0.69% to $75.88 per barrel and Brent at $82.23, down 0.74% on the day.

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