US stocks rallied more than one per cent and oil rose while gold, the yen and safe-haven US debt fell yesterday as investors seized on clear pledges of monetary policy support from Japanese and European central banks to push into riskier assets.

Strong figures on US consumer confidence and housing prices also favored stocks. In contrast, US debt prices slid and their yields rose to levels not seen in more than a year.

Heightened expectations that the US Federal Reserve could soon taper its stimulus programme caused turbulence across markets last week, leaving central banks in Japan and Europe to reassure investors their accommodative monetary policies would remain in place.

On Monday, when US markets were closed for the Memorial Day holiday, ECB Executive Board member Joerg Asmussen said the policy would stay as long as necessary.

The Dow Jones industrial average gained 103.70 points, or 0.68 per cent, at 15,406.80. The Standard & Poor’s 500 Index was up 9.55 points, or 0.58 per cent, at 1,659.15. The Nasdaq Composite Index was up 25.94 points, or 0.75 per cent, at 3,485.09.

The rush to stocks weighed on safe-haven US debt, sending prices down and yields up. The Treasury auctioned $35 billion of two-year notes, the start of $99 billion in new coupon-bearing supply this week.

Treasuries yields have jumped since Federal Reserve Chairman Ben Bernanke said last Wednesday that the central bank may decide to pull back on its bond purchases in the coming few Fed policy meetings if data show the economy is gaining steam. Ten-year notes were last down 29/32 in price to yield 2.11 per cent, up from 2.01 per cent on Friday. That marks a high not seen since April 6, 2012.

The promise of monetary support from the European and Japanese central banks was reinforced by a sign of some fiscal support as French, German and Italian governments urged action to tackle youth unemployment. Youth unemployment in countries like Greece and Spain has risen to 60 per cent.

In Europe, the broad FTSE Eurofirst 300 index provisionally closed up 1.3 per cent at 1,246.44

MSCI’s world equity index rose 0.5 per cent, reversing four days of losses.

The Nikkei stock index, which last week reached a five-and-a-half-year high before dropping 7.3 per cent on Thursday – its largest one-day loss since the March 2011 earthquake and tsunami – steadied yesterday, ending 1.2 per cent higher.

The US dollar rallied against the euro and yen after stronger-than-expected US economic data underscored the view that the Fed could reduce its bond purchases in coming months.

Higher US interest rates would boost the appeal of dollar-denominated investments.

The euro fell 0.5 per cent to $1.2869, having hit a session low of $1.2851, according to Reuters data. The dollar rose 1.2 per cent to 102.18 yen, after hitting a session high of 102.50 yen, rebounding from a two-week low of 100.68 set on Friday.

The dollar rose to a four-and-a-half-year high of 103.73 yen last Wednesday.

The euro rose 0.8 per cent to 131.50 yen, pulling away from Thursday’s trough of 129.94 yen, according to Reuters data. The safe-haven Swiss franc fell, with the dollar up 1.1 per cent at 0.9738 franc and the euro up 0.6 per cent at 1.2533 francs.

The dollar index, which measures the greenback versus a basket of currencies, rose 0.5 per cent to 84.161. Benchmark gold futures rose in early afternoon.

Spot gold was down 0.2 per cent to $1,390.80 an ounce after trading as low as $1,373.14 earlier.

US Comex gold futures for June delivery were up $3.40 an ounce.Brent crude oil rose more than $2 per barrel on rising Middle East risk and as stocks rallied.

Brent crude oil for July rose $1.70 to $104.32 per barrel while US crude rose $1.17 to $95.32 per barrel.

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