Gold hit a three-month high and global shares edged higher yesterday as investors bet that the new head of the US Federal Reserve would navigate through her first testimony to Congress without rocking the markets boat.
Fed chair Janet Yellen appeared before the House Financial Services Committee yesterday.
“The Fed will want to hold the market’s hand as much as possible over this period so they will be extremely keen to try and comfort the market in any way they can,” said Stewart Richardson, partner at macro hedge fund RMG Wealth Management.
“At the moment this is taking the form of ‘don’t worry interest rates will remain low for an extended period’.”
Just that hope was enough to lift gold 0.8 per cent to 1,283.95, while the dollar was a touch lower against the euro at $1.3673.
The greenback index eased 0.1 per cent to 80.544 against a basket of major currencies, having dropped as far as 80.498 at one point, its lowest level since January 29. The sharpest move came in the Australian dollar, which rose 0.9 per cent $0.9025 after figures showed a broad improvement in business activity combined with a near 10 per cent annual increase in home prices.
The FTSEurofirst 300 index of European shares rose 0.6 per cent, led by measurement technology group Hexagon after it published an upbeat outlook statement.
The broader MSCI All-Country World Index was up 0.3 per cent and US stock futures were also trading firmer with the S&P 500 e-mini contract up 0.4 per cent.
Yields on US 10-year Treasury paper have settled back at 2.67 per cent, well below recent highs of 3.04 per cent and less of a threat to the housing market.
Investors, too, have accepted that tapering is not the same as tightening and have pushed out the timing of the first actual hike in the Fed funds rate. A move is not fully priced in until late 2015, a view Yellen was likely to endorse.
In oil markets, prices steadied after recent gains as the market looked toward the end of a long and frigid winter.
Brent edged towards $109 a barrel yesterday.