Stocks gain as European shares hit new highs, dollar slips

Stocks gain as European shares hit new highs, dollar slips

By Herbert Lash and Marc Jones

NEW YORK/LONDON (Reuters) – World stocks edged higher on Thursday, helped by surging European stocks and a larger-than-expected rise in U.S. weekly jobless claims that buoyed interest rate cut hopes, while the dollar eased as the market awaits key inflation data next week.

The pan-European STOXX 600 and Britain’s FTSE 100 scaled fresh record highs, last up 0.24% and 0.36% respectively after the Bank of England kept rates unchanged.

But investors cheered indications more policymakers are warming to cutting rates soon. Two of BoE’s nine rate setters, one more than in April, voted for a cut and Governor Andrew Bailey said more could be on the way than investors expect.

The BoE sent a message that bets on the first cut being in August might be too conservative as it lowered its inflation forecasts for two and three years’ time to 1.9% and 1.6% – below its 2% target – from its February projections of 2.3% and 1.9%.

In the United States, initial claims for state unemployment benefits increased 22,000 to a seasonally adjusted 231,000 for the week ended May 4, the Labor Department said.

“It’s a relatively quiet week, but initial jobless claims came in weaker. We’re still clearly in that ‘bad news is good news’ macro regime,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management in Boston. “We’ll have to see if that’s the beginning of a trend. That is one of the biggest jumps we’ve seen in quite a while.”

MSCI’s gauge of stocks across the globe rose 0.30%. On Wall Street, the Dow Jones Industrial Average rose 0.46%, the S&P 500 gained 0.35% and the Nasdaq Composite gained 0.27%.

The dollar index, a measure of the U.S. currency against a basket of six others, including the yen and the euro, fell 0.22% to 105.28. The euro rose 0.29% to $1.0776 and the yen weakened 0.01% to 155.58 per dollar.

Sterling rebounded to strengthen 0.11% at $1.2510.

Benchmark Treasury yields edged higher following a brief dip after the jobless claims data.

The yield on benchmark 10-year Treasury note rose 0.3 basis points to 4.487%, while the two-year note’s yield, which typically moves in step with interest rate expectations, fell 1.9 basis points to 4.8238%

BULLS IN THE CHINA SHOP

Overnight in Asia, Chinese trade data and some property market developments had helped Chinese stocks continue their recent outperformance. MSCI’s dollar-denominated China index has jumped more than 13% over the past two months.

Customs figures showed that China’s imports jumped 8.4% in April from a year earlier, beating expectations for a rise of 4.8%, while exports returned to growth, meeting forecasts, in a boost to economic growth.

That helped Chinese shares build on earlier gains, with blue-chip stocks ending up almost 1% and Hong Kong’s Hang Seng index increasing 1.2%. News that China’s eastern metropolis Hangzhou will lift all home purchase restrictions in the ailing property sector, a key pillar of domestic demand, also boosted sentiment.

Property shares surged 2.5% as a result.

In other markets, Japan’s Nikkei reversed earlier gains to finish down 0.3%. Australia’s resources-heavy share market lost 1.1% while South Korea also retreated 1.2%.

(Reporting by Marc Jones; editing by David Evans and Will Dunham)