The S&P/ASX 200 Index (ASX: XJO) is off to the races on Friday.
In late morning trade today, the benchmark index is up a whopping 1.6% at 7,304 points.
It's important not to get too caught up in the daily market ups and downs and keep your eye on the long-term. But it's hard not to get a bit chuffed when every sector is lifting off.
Here's what has ASX 200 investors hitting the buy button today.
Image source: Getty Images
What's sending the ASX 200 rocketing today?
A series of macroeconomic stars are aligning for investors.
These are primarily being driven by the three largest economies on Earth: the United States, the European Union and China.
Commencing today, the People's Bank of China (PBoC) has dropped the reserve requirement ratio for most Chinese banks by 0.25%. That's the second such move this year, in an effort to spur on China's slowing economy.
The ASX 200 is also getting some tailwind as investors eye further potential stimulatory measures from the Chinese government. Alongside a drop in inventories, this has helped drive the iron ore price to another overnight gain. The industrial metal is currently trading for US$121.30 per tonne.
As for the EU, the European Central Bank (ECB) increased interest rates by another 0.25% yesterday in its ongoing battle with inflation. This sees the official ECB interest rate at 4.00% representing an all-time high.
Like the ASX 200 today, every major European index closed the day well into the green.
Why?
Largely because ECB president Christine Lagarde gave strong indications that, while rates might remain elevated for some time, this would very likely be the last hike from the central bank.
Which brings us to the world's biggest economy where both the S&P 500 Index (SP: .INX) and the Nasdaq Composite Index (NASDAQ: .IXIC) closed up more than 0.8% overnight.
Investors bid up US stocks following a range of data that supports the outlook for a so-called soft landing for the economy. Inflation came in right around where the market expected while the all-important US consumers have yet to significantly scale back spending.
Most analysts now believe the Federal Reserve will hold rates steady when it meets next week. Though the world's most influential central bank may yet push through one last rate hike in November.
Commenting on the macroeconomic factors sending global markets and the ASX 200 sharply higher, Tony Sycamore, an analyst at IG in Sydney said (quoted by Bloomberg):
Risk markets are in a more buoyant mood at the end of this week, following a dovish ECB rate hike, an inline US inflation report and strong consumer spending and labour market data.
