LONDON (Reuters) – A positive start in Europe nudged the main world share indexes and bond yields higher on Thursday, after the U.S. Federal Reserve’s second interest rate cut of the year while Japan and others kept their limited remaining powder dry.

The effects of the trade war has seen central banks around the world swing back into support mode this year, but the Fed’s central message on Wednesday was that it wasn’t expecting a major capitulation of the economy.

The Bank of Japan and Switzerland’s central bank then both kept their deeply negative interest rates on hold. Brexit-bound Britain was expected to do the same later, while an outlier hike in Norway also came with a hint it would be the last.

It was enough to push London’s FTSE, Frankfurt’s Dax and Paris, Milan and Madrid up between 0.2% and 0.8% in early moves after a broadly subdued Asian session.

MSCI’s broadest index of Asia-Pacific shares had ended down 0.5% as a 1% fall in Hong Kong and 1.1% drop in India offset 0.4% gains on Japan’s Nikkei and from China’s bluechip stocks.

In line with the view of no economic Armageddon, the benchmark government bond yields which act as a proxy for global borrowing costs, also rose.

The more sensitive two-year U.S. yields inched up to 1.75% and Europe’s key 10-year German Bund yield was up around 2 basis points albeit still below highs hit last week and at a mind-boggling -0.49%.

“This is not ‘QE4ever’ as we’ve heard it called,” analysts at RBC said of the Fed’s decision and signals. “We shouldn’t go too far in putting on QE-like trades”.

In the currency market, Bank of Japan’s inaction saw the yen rise off a seven-week low versus an already lower dollar and stage something of a jump against the Australian dollar. [/FRX]

The BOJ had maintained its pledge to guide short-term interest rates at minus 0.1% and the 10-year government bond yield around 0%. It also signalled it could add stimulus as early as next month but some traders had expected a move on Thursday after the Fed’s rate cut.

Yen bulls took the currency as far as 107.79 to the U.S. dollar before it settled at 108.06 for a gain of 0.4% on the day. The move against the Aussie dollar had been as large as 1%..

“There were large yen-buying orders before the BOJ, and that just carried through,” said Tohru Sasaki, head of Japan markets research at J.P. Morgan Securities in Tokyo.

BACK TO THE FUTURES

In contrast to Europe’s upward shuffle, U.S. stock futures were pointing to modest 0.1%-0.2% falls for Wall Street later.

The S&P 500 had reversed losses and ended broadly flat on Wednesday after Fed chief Jerome Powell said he did not see an imminent recession or think the Fed will adopt negative rates.

The Fed had cut interest rates to 1.75%-2.00% in a 7-3 vote but made a point of saying U.S. labour market remains strong.

So-called dot-plot forecasts from all 17 policymakers also showed disagreement, with seven expecting a third rate cut this year, five seeing the current rate cut as the last for 2019, and five who appeared to have been against even Wednesday’s move.

“This is a small positive for share prices as long as there is no recession,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney.

“The only problem is a 25 basis-point cut was already expected, and the comments and dot-plot forecasts were not as dovish as the market hoped.”

Elsewhere in the currency market, the Aussie fell 0.6% to $0.6790 after data showed the nation’s jobless rate rose slightly to 5.3% in August, bolstering expectations for the central bank to cut rates.

Sterling traded at 88.53 pence per euro, near its strongest level since May 30 ahead of a Bank of England policy meeting later where uncertainty about how, when or maybe even if the UK leaves the European Union remains the key issue.

Among commodities, U.S. crude futures rose 0.31% to $58.29 per barrel having largely stabilised after attacks in Saudi Arabia over the weekend sent prices soaring on Monday.

Washington has blamed Iran for the attacks, a charge which Tehran denies. U.S. Secretary of State Mike Pompeo has said the strike was “an act of war.”

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