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Stocks on Wall Street hit another record on Thursday after weaker than expected US growth data cemented expectations that the Federal Reserve would maintain its pandemic-era stimulus that has supported financial markets for a year and a half.
The moves followed data showing US gross domestic product grew at an annualised rate of 6.5 per cent in the second quarter, missing the 8.5 per cent rise expected by economists polled by Reuters.
The S&P 500, the blue-chip US share index, was up 0.6 per cent at lunchtime in New York, on track to beat the all-time high hit on Monday. The Dow Jones Industrial Average also touched a fresh peak while the tech-heavy Nasdaq Composite index climbed 0.4 per cent.
The dollar index, which measures the US currency against those of peers, fell 0.4 per cent to its weakest level since late June after the GDP miss.
“Sentiment about the economy has become less optimistic, but that is good for equities, strangely enough,” said Nadège Dufossé, head of cross-asset strategy at fund manager Candriam. “It makes central banks less likely to withdraw support.”
Jay Powell, the Fed chair, said on Wednesday that despite citing “progress” towards the bank’s goals of full employment and 2 per cent average inflation, there was more “ground to cover” ahead of any tapering of its vast bond-buying programme.
Initial jobless claims in the US came in at 400,000 last week, compared with 424,000 a week earlier, according to the labour department on Thursday. Claims have remained above pre-pandemic levels of about 200,000 a week, with their descent largely stalling since the beginning of June.
Looking beyond the headline GDP number, some analysts said the health of the US economy was stronger than it first appeared.
Growth numbers below the surface showed that consumer spending had surged, “while the negatives in the report were from inventory drawdown, presumably from supply shortages”, said Matt Peron, director of research and portfolio manager at Janus Henderson Investors.
“This implies that the economy, and hence earnings which have also been very strong so far for Q2, will continue for some time,” he added. “The economy is back above pre-pandemic levels, and earnings are sure to follow, which should continue to support equity prices.”
Those upbeat earnings helped propel European stocks to another all-time high on Thursday, with results from Switzerland-based chipmaker STMicroelectronics and the French manufacturer Société Bic helping lift bourses.
The region-wide Stoxx Europe 600 benchmark closed up 0.5 per cent to a new record, while London’s FTSE 100 gained 0.9 per cent and Frankfurt’s Xetra Dax ended the session 0.5 per cent higher.
In Asia, market sentiment was also boosted by a move from Chinese officials to soothe nerves over regulatory clampdowns on the nation’s tech and education sectors.
Beijing officials held a call with global investors, Wall Street banks and Chinese financial groups on Wednesday night in an attempt to calm nerves, as fears spread of a more far-reaching clampdown. Hong Kong’s Hang Seng rose 3.3 per cent on Thursday, although it was still down more than 8 per cent so far this month. The CSI 300 index of mainland Chinese stocks rose 1.9 per cent.
Brent crude, the global oil benchmark, gained 1 per cent to $75.55 a barrel.