Stock markets around the world rallied yesterday, while the US dollar fell, a day after the Federal Reserve signalled that interest rates would rise more slowly than many had expected.
An unconfirmed report that aid for Greece would be extended until the end of the year, possibly averting a default, eased concern over the region and returned European equities to positive territory.
US stocks hit session highs after the report, and the Nasdaq set a new intraday record, breaking one that had held since March 2000.
On Wednesday, the Fed said that the economy was probably strong enough to support a rate increase this year. But it lowered its forecasts for 2015 growth and reduced its federal funds rate forecast.
Analysts are torn on whether the first rate hike in nearly a decade will come in September or December, but the comments indicated that no matter when the first one occurred, the move would not be aggressive.
“Gradualism for rate increases is a soothing message for the market,” said Alan Gayle, senior investment strategist and director of asset allocation at RidgeWorth Investments in Atlanta. “September remains on the table, but the downward drift in the forecasts for next year means the increases will happen gradually, and that’s a relief for investors.”
The Dow Jones industrial average rose 209.93 points, or 1.17 per cent, to 18,145.67, the S&P 500 gained 22.4 points, or 1.07 per cent, to 2,122.84 and the Nasdaq Composite added 69.92 points, or 1.38 per cent, to 5,134.80.
The benchmark 10-year US Treasury note fell 18/32 in price, pushing the yield up to 2.3722 per cent.
The US dollar index, which measures the greenback against a basket of currencies, fell 0.3 per cent. The dollar fell 0.3 per cent against the yen.
Without citing sources, Germany’s Die Zeit reported that Greece’s creditors plan to offer to extend its existing aid programme until the end of this year, but without the participation of the International Monetary Fund.
The report comes after the IMF dashed any hope that Greece could avert default if it fails to repay a €1.6 billion loan by the end of June, piling pressure on leftist Prime Minister Alexis Tsipras.
“Greece is the best drama on TV right now, and we put the odds of a successful resolution at no better than a coin toss,” Gayle said. “Clearly this has the potential to really increase near-term volatility.”
The MSCI International ACWI Price Index rose one per cent on the day while the pan-European FTSEurofirst 300 index rose 0.2 per cent, erasing earlier losses.
The euro rose 0.4 per cent.
Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4 per cent, while Japan’s Nikkei skidded 1.1 per cent to a one-week low as the yen gained against the dollar.
In commodities, oil rose on the back of the weaker dollar. Brent crude rose 0.7 per cent to $64.32 a barrel and US crude rose 0.8 per cent to $60.42.
Spot gold prices popped 1.2 per cent while silver was up 0.4 per cent. Copper rose 0.1 per cent, snapping its fourth straight daily decline.