Global Markets React to Rate Cuts with Mixed Results

European stock markets saw modest gains following recent rate cuts by the U.S. Federal Reserve, with bond yields and oil prices showing varying trends. Wall Street reached record highs, while the Fed's cautious approach left investors divided. Awaited discussions between U.S. and Chinese leaders also influenced market dynamics.

European stock markets experienced slight gains on Friday, aligned for a modest weekly ascent thanks to the U.S. Federal Reserve trimming interest rates by a quarter percentage point. This cut, the first since December, accompanied similar cuts in Norway and Canada, contributing to an overall upswing in markets.

Despite Wall Street closing at an all-time high on Thursday, the Nikkei retreated from its peak during Asian trading. The Bank of Japan's signaling of further withdrawal from stimulus measures led to this decline. At 0923 GMT, the MSCI World Equity index remained largely unchanged, with a 0.1% increase in the pan-European STOXX 600, while London's FTSE 100 steadied.

Investor sentiments are hopeful that central bank rate reductions will continue to propel stocks upward. Amelie Derambure from Amundi expressed confidence in maintaining a risk-on strategy and an equity-heavy portfolio. However, the Fed's conservative stance on further rate cuts disappointed some, as they hoped for a more decisive shift.

Market participants eagerly await news from a potential dialogue between Chinese President Xi Jinping and U.S. President Donald Trump, which is set to discuss the TikTok agreement and tariffs. The British pound fell due to a 0.4% drop after public sector borrowing spiked, while the Bank of England retained current rates but slowed bond divestiture.

The dollar index strengthened slightly, reflecting a minor increase amid weakened levels since 2022. Yen gains against the dollar, coupled with rising German and U.S. bond yields, highlighted investor concerns over government debt. Meanwhile, oil prices dipped on demand worries, and gold posted gains.

(With inputs from agencies.)