World stocks held near two-week highs on Wednesday as investors bet on a worldwide wave of central bank stimulus, with expectations building that the United States and the euro zone may deliver interest rate cuts as early as July.
“It should be really clear to absolutely everyone that this is a monetary policy turning point... Those rate cut expectations have now shifted much closer,” said Ulrich Leuchtmann, head of currency and emerging markets research at Commerzbank. MSCI’s global equity index rose 0.4 per cent, adding to Tuesday’s 1 per cent gain, as Asian shares excluding Japan followed the lead of their European and U.S. counterparts to jump almost 2 per cent - their biggest one-day rally since January.All eyes are now on the Fed, with Chairman Jerome Powell holding a news conference after the announcement.Futures are almost fully priced for a quarter-point easing in July and imply more than 60 basis points of cuts by Christmas.
“Markets will be looking for validation of this pricing,” he added. “We think this represents a fairly high bar for the Fed to deliver a dovish surprise.”BofA Merrill Lynch’s latest fund manager survey spoke volumes about the sea change in sentiment. It showed investors were dumping stocks and had upped bond allocations to nearly eight-year highs. They also had crowded into safe-haven U.S. Treasury bonds and cash.