Shares hit a two-month high and the dollar swooped towards a three-month low on Thursday, after Federal Reserve signals of smaller interest rate rises from next month were followed by the message from Frankfurt that the ECB will plough on.
With Wall Street shut for Thanksgiving, it was up to Europe to continue the rebound in market confidence that has been building for more than a month.
It seemed a bit of a struggle early on when London's FTSE refused to budge, but there were just enough gains in the rest of Europe and in Asia overnight to ensure things kept shuffling forward.
By lunch MSCI's 47-country index of world stocks (.MIWD00000PUS) was at its highest since mid-September, while German and British government bond yields, which drive Europe's borrowing costs, had fallen to their lowest levels since October and September respectively.
"The Federal Reserve minutes signalled that some sensible voices are trying to drown out Fed Chair Powell’s relentless 'hike, hike, hike' chant," said UBS Chief Economist Paul Donovan.
A "substantial majority" of Fed policymakers had agreed it would "likely soon be appropriate" to slow the pace of interest rate rises, the minutes released on Wednesday showed, although Donovan pointed out that there was no signal of an actual halt yet and various Fed members thought rates might need to go "somewhat higher" than expected.
Futures markets show investors now see U.S. rates peaking just above 5% by May and are pricing in a roughly 75% chance that the Fed now switches to 50 basis point rises rather than the 75 bps it has been using recently.
The ECB's equivalent minutes out on Thursday showed its rate setters fear that inflation may now be getting entrenched in the euro zone.
