Stocks Set for Best Week of Year After Dovish Tilt: Markets Wrap

A series of central bank meetings suggested a shift towards looser policy, sending stocks soaring as they prepared for their greatest week of the year

The S&P 500 was expected to rise 2.4%, its highest level since mid-December, while MSCI Inc.'s global index of equities increased by almost 2% this week. With a fourth consecutive day of gains, the 10-year yield fell nearly 10 basis points for the week as treasuries continued their ascent.

Following the Federal Reserve meeting last week, which stoked expectations that US officials will implement three interest-rate decreases this year, investor appetite has been reignited. Stocks and government bonds rose as their currencies fell, fueled by confidence over unexpected easing by the Swiss National Bank and a more dovish attitude by Bank of England policymakers the following day.

The highest S&P 500 year-end forecast among strategists tracked by Bloomberg was raised by Societe Generale SA from 4,750 to 5,500. "US exceptionalism is going from strength to strength," stated Manish Kabra, head of US equity strategy for the French bank. "We see this as reasonable, not excessive, despite the widespread optimism in the market."

The SNB's action fueled speculation that other major central banks may drop policy rates quicker than the Fed, sending the dollar soaring 0.4% to its highest level in over a month on Friday. The Stoxx 600 index in Europe fell slightly, but US futures remained unchanged.

The yuan broke through a highly anticipated technical threshold, and Chinese markets were the first in Asia to fall. The most significant daily reference rate reduction since early February was announced by the People's Bank of China, leading some to speculate that Beijing is approving further depreciation in the midst of a shaky economic recovery.

Despite Japan's inflation picking up speed for the first time in four months, the yen remained relatively unchanged at approximately 152 per dollar. The market is waiting to see if the Bank of Japan will raise interest rates again this year, following its first boost since 2007.

Oil maintained a two-day decline in commodities as traders evaluated the potential impact of global interest rate forecasts and Middle Eastern geopolitical tensions. In other news, Bitcoin was trading at roughly $66,000, and gold dipped after breaking through $2,200 per ounce.

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