# Stocks up, bond yields fall as markets mull a Fed policy pause
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-23
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Global Stock Market Soars as Federal Reserve Hints at Rate Pause
Meta Description: Get the latest insights on how Wall Street's surge and the Fed's potential pause on interest rates are shaping global stock markets. Stay informed
URL: https://financedigest.com/stocks-up-bond-yields-fall-as-markets-mull-a-fed-policy-pausehtml

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By Koh Gui Qing

NEW YORK (Reuters) – Wall Street stocks jumped on Thursday, pushing up global stock indexes, and Treasury yields fell, after investors took comfort that the Federal Reserve might pause its interest rate rises to offset the turmoil in financial markets.

The gains in U.S stocks offset loses in Europe, where a post-Credit Suisse rebound sputtered to a halt as Switzerland, Norway and Britain all showed the year-long cycle of sharp interest [rate rises](https://www.financedigest.com/oil-falls-as-earthquake-impact-on-crude-eases-rate-hike-fears-rise.html "Oil falls as earthquake impact on crude eases, rate hike fears rise") was by no means over.

The Fed’s hint of a pause after announcing a quarter-point rate rise on Wednesday, even as it re-stated its commitment to fight inflation, [provided relief](https://www.financedigest.com/recovery-bus-provides-cool-relief-for-s-koreas-covid-19-testers.html "‘Recovery bus’ provides cool relief for S.Korea’s COVID-19 testers") to markets. But decisions by Switzerland’s SNB to jack up rates despite a torrid week following the takeover of [Credit Suisse](https://www.financedigest.com/mitsubishi-ufj-to-postpone-at1-bond-issuance-in-credit-suisse-fallout.html "Mitsubishi UFJ to postpone AT1 bond issuance in Credit Suisse fallout") and by the Bank of England to hoist borrowing costs after a nasty inflation surprise were reminders not to get carried away.

By early afternoon, the Dow Jones Industrial Average was up 0.53%, the S&P 500 climbed 0.85%, and the Nasdaq Composite Index jumped 1.56%. The [gains helped MSCI’s main world share](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") index to jump 0.85%.

Stephen Innes, a managing partner at SPI Asset Management, said [investors are betting that despite](https://www.financedigest.com/despite-the-headwinds-investors-have-important-reasons-to-be-cheerful.html "DESPITE THE HEADWINDS, INVESTORS HAVE IMPORTANT REASONS TO BE CHEERFUL") the Fed’s vows to tame inflation, there is a chance “the Fed loses its nerve and downshifts anyway.

Note the modern-day history book of [Fed pauses is very bullish for stocks,”](https://www.financedigest.com/oil-dips-after-fed-comments-us-crude-stock-build.html "Oil dips after Fed comments, US crude stock build") Innes said.

In Europe, news of the rate [hikes in Switzerland and Britain helped push the European-wide STOXX 600 share](https://www.financedigest.com/uks-bellway-to-buy-back-shares-hike-social-housing-output.html "UK’s Bellway to buy back shares, hike social housing output") index down 0.21%. The banking sector was again a drag, with the index of top [European banks](https://www.financedigest.com/token-inc-launches-london-office-to-answer-demand-from-european-banks.html "Token, Inc. Launches London Office to Answer Demand from European Banks") down 2.53%.

Investor bets of a more dovish [Fed put the dollar](https://www.financedigest.com/dollar-pauses-for-breath-as-fed-swings-into-focus.html "Dollar pauses for breath as Fed swings into focus") on the back foot, with the dollar index flat after hitting a seven-week low earlier in the session. The pound barely budged, having already added to its near 5% rally over the last fortnight with a 0.22% rise to $1.22969.

John Leiper, Titan Asset Management’s chief investment officer, said the BoE’s hike came as no surprise following Wednesday’s painful [inflation data](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data").

“We think there is more to come,” he added, although he cautioned the result could be a recession.

Fed chief Jerome Powell had said that, while inflation remained a problem, the current [stresses in the banking](https://www.financedigest.com/market-stress-indicators-react-sharply-after-u-s-bank-failures.html "Market stress indicators react sharply after U.S. bank failures") sector could have a significant impact on the U.S. economy, thereby reducing the need for [rate rises](https://www.financedigest.com/shares-slip-yields-rise-as-u-s-data-sparks-rate-hike-concerns.html "Shares slip, yields rise as U.S. data sparks rate hike concerns").

Germany’s hawkish European [Central Bank rate](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") setter, Joachim Nagel, on Wednesday said he thought euro zone rates were “approaching restrictive territory,” referring to a level that curtails growth.

“I do not know when we will more or less be there,” he said at an event in London. But what I know is that when we are there we have to stay there and not [come down too early.”](https://www.financedigest.com/christmas-comes-early-homebuyers-camberwell.html "Christmas Comes Early For Homebuyers In Camberwell")

Both the [euro and yen remained up on the day after the SNB’s half-point hike](https://www.financedigest.com/stocks-euro-gain-amid-divergent-fed-ecb-rate-hike-outlooks.html "Stocks, euro gain amid divergent Fed, ECB rate hike outlooks"). \[FRX/\] (Graphic: [Global markets](https://www.financedigest.com/global-bank-bonds-claw-back-losses-as-markets-rout-eases.html "Global bank bonds claw back losses as markets rout eases") in 2023, https://fingfx.thomsonreuters.com/gfx/mkt/movakwyrqva/Pasted%20image%201679575321648.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/03/Pasted-image-1679575321648-359x500.jpg)

[BRIGHT FUTURES](https://www.financedigest.com/the-future-of-the-atm-is-bright.html "The future of the ATM is bright")

U.S. stocks sold off on Wednesday after U.S. Treasury Secretary Janet Yellen [told lawmakers that she had not considered or discussed creating “blanket insurance”](https://www.financedigest.com/uk-banks-and-insurers-told-to-step-up-help-for-struggling-customers.html "UK banks and insurers told to step up help for struggling customers") for U.S. [banking deposits without approval](https://www.financedigest.com/tbc-bank-of-georgia-increases-loan-approval-rate-by-40-percent-using-fico-technology.html "TBC BANK OF GEORGIA INCREASES LOAN APPROVAL RATE BY 40 PERCENT USING FICO TECHNOLOGY") from Congress.

[Markets are now pricing in an approximately 65% chance of the Fed](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") pausing at its next meeting, in May, and a 35% chance of a 25-basis-point rise.

For bond [markets](https://www.financedigest.com/us-stock-futures-bonds-rally-as-markets-flirt-with-fed-pause.html "US stock futures, bonds rally as markets flirt with Fed pause") it meant European government bond yields – which reflect borrowing costs – were heading down again. German Bunds were back at 2.25%, having seen 10-year U.S. [Treasury yields](https://www.financedigest.com/wall-street-drops-treasury-yields-gyrate-on-fed-chairman-powells-remarks.html "Wall Street drops, Treasury yields gyrate on Fed Chairman Powell’s remarks") dip back below 3.5%.

Among [commodities Brent oil](https://www.financedigest.com/commodities-trading-houses-help-keep-russian-oil-flowing.html "Commodities trading houses help keep Russian oil flowing"), which has fallen nearly 9% this month, slipped 0.53% to $76.28 a barrel. Gold, which benefits from a more dovish Fed and which is up more than 8% for March, rose 1.38% to $1,996.81 an ounce. \[GOL/\]

“The thought of peak U.S. [rates being within reach is bolstering](https://www.financedigest.com/hopes-of-slowdown-in-rate-hikes-bolster-shares-ahead-of-u-s-gdp.html "Hopes of slowdown in rate hikes bolster shares ahead of U.S. GDP") (gold) prices,” said Han Tan, chief market analyst at Exinity. As long as [market expectations for a 2023 rate](https://www.financedigest.com/no-santa-rally-for-markets-as-central-banks-dampen-peak-rate-hopes.html "No Santa rally for markets as central banks dampen peak rate hopes") cut remain intact, gold may well revisit the psychologically important $2,000 mark.

(Reporting by Marc Jones; Editing by Mark Heinrich, Alex Richardson, Jonathan Oatis and Leslie Adler)


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