Global equity markets rose yesterday as diminished expectations of US interest rate hikes this year pushed the dollar lower, which in turned boosted the prices of commodities.
The dollar fell for a fourth day on the latest batch of soft US data, while comments from a US Federal Reserve policymaker on Wednesday were viewed as a sign further rate hikes could be delayed.
Those comments were buttressed yesterday by Robert Kaplan, the new head of the Dallas Fed, who said the central bank should be “patient” on rate increases.
The recent weakness in the greenback has provided investors with the incentive to take profits in successful trades against commodities and emerging markets, which had suffered after a run higher by the dollar.
The US currency fell 0.8 per cent against a basket of major currencies yesterday and is down three per cent for the week, on pace for its worst week since May 2009. It hit a three-and-a-half month low against the euro and held close to a two-week low against the Japanese yen.
Oil was volatile, fluctuating between gains and losses, following a sharp climb in the prior session, as investors assessed the potential for talks on a production cut. Brent, the global benchmark, was down 0.9 per cent at $34.73 a barrel, after hitting a high of $35.84 earlier in the day, while US crude was off 0.43 per cent at after reaching a high of $33.60.
The fall in the dollar also helped push metals higher, with copper and zinc both up more than one per cent. In turn, that lifted emerging markets, whose economies are highly depending on commodities.
The MSCI emerging markets index climbed 2.8 per cent.
European shares dipped, with the pan-European FTSEurofirst 300 index off 0.15 per cent, weighed down by a drop of nearly 11 per cent in Credit Suisse, which reported a full-year loss. Commodity-related shares surged, however, as the STOXX Europe 600 Basic Resources Index jumped 7.3 per cent and the oil and gas index climbed 3.3 per cent.
The Dow Jones industrial average rose 75.6 points, or 0.46 per cent, to 16,412.26, the S&P 500 gained 4.67 points, or 0.24 per cent, to 1,917.2 and the Nasdaq Composite added 7.06 points, or 0.16 per cent, to 4,511.30.
The US gains were led by a 2.4 per cent climb in the materials sector while energy advanced 0.4 per cent. The MSCI World equity index rose 0.8 per cent.
Stocks globally have had a dismal start to 2016, smacked by tepid US growth, falling oil prices, and concern the world faces a China-led slowdown.
However, another potential worry, that the US Federal Reserve would stay on course for four interest rate hikes in 2016, has eased somewhat.
Ten-year US Treasury yields advanced 4/32 basis point to 1.8687 per cent.
Gold, was last up 1.2 per cent at $1,156.03 after hitting a three-month high at $1,157 an ounce.