The dollar strengthened, helped by stronger-than-expected inflation data, and US stocks were driven higher by the financial sector and bank earnings reports.
The dollar was up 0.5 per cent against a basket of currencies, on track for its biggest one-day gain since September 21.
A 0.2 per cent rise in September core US consumer prices revived bets domestic inflation is edging closer to the Federal Reserve’s two per cent target.
The data also pushed up US Treasuries yields slightly as it renewed some hopes for a 2015 Federal Reserve rate hike.
“On the margin, today’s data lends some credence to the possibility that the Fed could still build a 2015 case for liftoff,” said Neil Bouhan, government bond strategist at BMO Capital Markets in Chicago.
US stocks snapped two days of losses, also helped by some strength in third-quarter earnings. While the benchmark S&P 500’s financial sector led the pack with banks as the top drivers, results were mixed.
Goldman Sachs shares fell 1.5 per cent to $176.83 after results missed expectations on weak bond trading, but Citigroup rose one per cent after its results beat estimates.
“I think we could be looking at a bumpy, mixed positive session,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York, adding the market could turn as investors digest news through the day.
The Dow Jones industrial average rose 57.52 points, or 0.34 per cent, to 16,982.27, the S&P 500 gained 9.27 points, or 0.46 per cent, to 2,003.51 and the Nasdaq Composite added 35.80 points, or 0.75 per cent, to 4,818.65.
Crude oil fell yesterday on expectations US government data will show a rise in inventories. Brent was off 0.9 per cent at $48.69 per barrel while US crude was down 1.8 per cent at $45.81.
European shares snapped a three-day slide on the prospects of more central bank support. European Central Bank policymaker Ewald Nowotny said it was “quite obvious that additional sets of instruments are necessary” to lift eurozone inflation.
The regional FTSEurofirst 300 rose 1.4 per cent.
Asian shares hit their highest levels since mid-August, also hoping for stimulus from China and Japan.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.1 per cent. Japan’s Nikkei gained 1.15 per cent, as the second successive fall in manufacturers’ sentiment in Japan kept pressure on policymakers to do more.
MSCI’s emerging share index was up two per cent after a two-day fall and hit its highest level since August 13.
“We are seeing continuous unwinding of bearish bets on emerging currencies generally, as views of ‘no US hike this year’ are growing,” said Seungji Jeon, Samsung Futures’ FX analyst in Seoul.