Stock markets worldwide extended their recent rally yesterday as investors continued to be reassured that the US Federal Reserve would unwind its accommodative stimulus with care.
Fed Chairman Ben Bernanke testified before Congress for a second day yesterday, this time to the US Senate Banking Committee. On Wednesday, he had reiterated that the Fed would only start phasing out its stimulus once it is sure the economy is strong enough to stand on its own feet.
The comments lured investors to equities, pushing major bourses up to record-high levels and the benchmark S&P 500 index on track for its tenth positive session out of the past 11. The euro fell and the dollar rose against a basket of currencies.
“Bernanke has made equities the only place for most people to go, and the rally has been entirely on him,” said Mark Grant, managing director at Southwest Securities in Fort Lauderdale. As he speaks to Congress, Grant added: “Bernanke will stay the course and calm markets as much as he can.”
The Dow Jones industrial average was up 105.36 points, or 0.68 per cent, at 15,575.88. The Standard & Poor’s 500 Index was up 9.72 points, or 0.58 per cent, at 1,690.63.
The Nasdaq Composite Index was up 6.74 points, or 0.19 per cent, at 3,616.74.
US stocks were also supported by strong quarterly earnings reports from IBM and Morgan Stanley, though Intel Corp sank following its results. A jump in regional factory activity also boosted sentiment.
The MSCI International ACWI Price Index rose 0.45 per cent.
European equities rose 0.9 per cent, outperforming US markets as the broad STOXX Europe 600 broke above a resistance level.
The dollar rose 0.35 per cent against a basket of currencies while the euro was down 0.4 per cent.
The US benchmark 10-year Treasury note was down 10/32 in price, with the yield at 2.5265 per cent.
Market participants awaited a meeting of Group of 20 finance ministers for signs of an orchestrated approach to the end of US money-printing, which could help defuse volatility in global markets.
The G20, which meets in Moscow today and tomorrow, includes many of the emerging economies that have been at the sharp end of the dollar’s surge since Bernanke first signalled in May the Fed would roll back its bond-buying programme.
With no surprises expected from Bernanke during his congressional testimony, currency markets were starting to focus on Sunday’s Upper House elections in Japan, which are expected to strengthen the hand of Prime Minister Shinzo Abe and his radical stimulus strategy.
Commodities, meanwhile, were mixed, with Brent oil flat but US crude futures jumping 1.3 per cent as US stockpiles fell for a third straight week. Copper rose 0.1 per cent and gold rose 0.6 per cent. (Reuters)