European shares rise after Wall Street gains led by US tech

European shares rose on Friday after an overnight rally on Wall Street, as signs of an end to tighter interest rate policy from the Federal Reserve pushed some of the world’s biggest tech shares to all-time highs.

Europe’s region-wide Stoxx 600 added 0.4 percent at the open, while France’s CAC 40 and London’s FTSE 100 both gained 0.5 percent.

Overnight on Wall Street, the benchmark S&P 500 and the tech-heavy Nasdaq Composite both closed 1.2 percent higher as economic data showed signs of a softening labor market and a slowdown in consumer spending. Investors took the data as a sign that the central bank may need to make fewer rate hikes to reduce inflation. Apple and Microsoft hit record highs.

Japan’s Topix index rose 0.3 percent after the Bank of Japan kept its overnight interest rate at minus 0.1 percent as expected, even though inflation was above the central bank’s target of 2 percent.

The country’s benchmark 10-year government bond yield was flat at 0.4 percent after the announcement, while the central bank said it would continue to allow it to fluctuate 0.5 percentage points above or below a target yield of zero.

Elsewhere in Asia, China’s CSI 300 rose 1 per cent and Hong Kong’s Hang Seng index rose 0.9 per cent. Contracts tracking the S&P 500 and Nasdaq Composite were flat ahead of the New York open.

Earlier in the week, the US Federal Reserve held the federal funds rate steady at a target range of 5 to 5.25 percent, marking the central bank’s first pause in more than 14 months.

Yet the move came with aggressive messaging from the Fed, which said it expected two more rate hikes this year. According to data from Refinitiv, investors have priced in a 69 percent chance that US policymakers will push through with another quarter-point increase at their next meeting in July.

The yen and the pound strengthened against the dollar, with the yen rising to $1.41, its highest level since November, and sterling touching $1.28, its highest point since April last year.

The yield on two-year US Treasury notes rose 0.05 percentage points to 4.7 percent on Friday. The yield on the benchmark 10-year note was up 0.03 percentage points to 3.76 per cent. Bond yields rise as prices fall.

On Thursday, the European Central Bank made a more aggressive move than the Fed, raising its deposit rate by 0.25 percentage points to 3.5 percent, the highest level since July 2001.

The bank signaled more monetary tightening to come, predicting that inflation would not return to its 2 percent target for another two years.