European stocks rallied on Thursday at the first opportunity to respond to the latest Federal Reserve decision, the big story being the sell-off of bonds that the central bank did not suppress.
The Stoxx Europe 600 SXXP,
rose 0.2%, with even stronger gains for the Stoxx Europe TMI Value. STVP,
The yield on the 10-year US Treasury TMUBMUSD10Y,
jumped as high as 1.73%, with the move as European traders began their shift. Revenue on German TMBMKDE-10Y,
and UK TMBMKGB-10Y,
bonds of comparable maturity also rose, albeit not to the same extent. Revenues move in the opposite direction of prices.
Banks including Deutsche Bank DBK,
rose on the growing gap between short- and long-term interest rates, while rising bond yields the Nasdaq 100 futures NQ00,
lower.
The Federal Reserve’s point count indicated that the median voter did not expect interest rates to rise in two years. Chairman Jerome Powell said the central bank would keep policy loose until employment recovers, as it downplays what is expected to be a major rebound in inflation data in the new months.
The Bank of England will individually make its own interest rate decision at 12 noon local time, or 8 am East. Like the Fed, the focus will be on reporting, especially as vaccination efforts in the UK are fruitful. “While there is little doubt about the consensus for ‘no change’, the market will look for a hint of a shift in MPC preference, either through votes or outlook,” said Michael Matthews, fund manager at Invesco .
Also on the road in Europe, Volkswagen VOW3,
preferred stocks extended their maturity to a new six-year high, up 5%. Porsche Automobil Holding PAH3,
which is the majority shareholder of Volkswagen, also gained 5%. Hopes for VW’s electric vehicle ambitions were sparked by the company’s battery presentation earlier this week.
Sartorius SRT,
the pharmaceutical and laboratory equipment supplier, jumped 10% after rising sales and margin guidance for the year, citing a strong first 10 weeks of 2021.