SINGAPORE/LONDON, March 21 (Reuters) - Share benchmarks around the world hit record highs on Thursday on investor optimism that interest rate cuts are on the way in many countries, after the Swiss National Bank became the first major central bank to ease policy this cycle.
Gold prices and share benchmarks in Japan and Europe earlier on Thursday had already followed the S&P 500 to all-time peaks after the Federal Reserve a day earlier held rates steady and indicated it would stick with its plans to cut rates by 75 basis points this year.
The Bank of England then wrapped up a bumper week for global central banks by leaving rates unchanged but saying the British economy is "moving in the right direction" to start cutting interest rates.
Two officials who had previously called for higher rates also changed their stance.
The decision helped Britain's resource-heavy FTSE 100 index to rise further, last up 1.5%, and weighed on the pound, down 0.4% against the dollar at $1.2738. (.FTSE), opens new tab,
But the bigger drama was in Switzerland where the Swiss National Bank, became the first major central bank to ease policy, cutting its main interest rate by 25 basis points to 1.50%, a surprise move which caused the currency to weaken.
The euro rose by as much as 1.2% to 0.978 francs, its highest since July 2023, and the dollar gained a similar amount to 0.8975 francs a four-month high.
The Swiss benchmark index (.SSMI), opens new tab was last up 0.9% outperforming a 0.6% gain in Europe's STOXX 600 index, (.STOXX), opens new tab though the broad European benchmark is already at record highs. Swiss bond yields fell.
"We've watched with great interest Powell's speech and the SNB today, and it broadly validates the narrative that, although we had a bit of heat in some inflation prints and services inflation, overall central banks are in a relatively comfortable spot," said Samy Chaar, chief economist at Lombard Odier.
Item 1 of 2 The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, March 20, 2024.
"The area where it was most comfortable is Switzerland because inflation is constrained, and let's keep in mind they had to revise significantly down their inflation forecast," he said, referring to the Swiss central bank.
Swiss inflation has been within the SNB's 0%-2% target range for the past nine months.
U.S. Federal Reserve Chair Jerome Powell said on Wednesday recent high inflation readings had not changed the underlying "story" of slowly easing price pressures as the central bank stayed on track for three interest rate cuts this year and affirmed that solid economic growth will continue.
He was speaking after the Fed left U.S. rates on hold between 5.25% and 5.5%, as expected. Market pricing currently reflects expectations that the Fed and the European Central Bank will start cutting rates at their June meetings.
U.S. S&P 500 futures were up 0.5% pointing to further gains on Thursday, after the benchmark (.SPX), opens new tab hit a new record high Wednesday. Earlier, Japan's Nikkei (.N225), opens new tab and Taiwan weighted index (.TWII), opens new tab each climbed 2% to record levels.
Government bonds rallied for a second day. The U.S. 10-year yield was down 3 bps at 4.245%. Germany's 10-year yield was also down 3 basis points at 2.40%.
Lower yields also helped non-yielding gold rise to a fresh record high of $2,222.39 an ounce, and was last trading just below that, up 0.9%.
Elsewhere in foreign exchange markets, the dollar dipped on prospects of U.S. rate cuts, before rebounding, though that bout of weakness briefly helped Japan's yen recover from near multi-decade lows to 150.27 per dollar.
The yen was last at 151.2 per dollar, flat on the day, with the euro down 0.13% at $1.0907.
Brent crude futures , up 5.6% in little more than a week on supply concerns were a touch softer at $85.80 a barrel.
Editing by Sam Holmes and Miral Fahmy
