Global equity markets mostly rose yesterday after Janet Yellen, President Obama’s choice to lead the Federal Reserve, signalled the US central bank’s loose monetary policy would remain in place for some time, while weak euro zone growth lifted the dollar.
Yellen defended the Fed’s bold steps to spur economic growth, calling efforts to boost hiring “imperative” during a hearing over her nomination before the US Senate Banking Committee.
Yellen’s comments drove the Dow and the S&P 500 to fresh record highs after her prepared remarks on Wednesday spurred the two indices to closing highs and lifted European shares yesterday before the hearing.
Canada’s main stock index hit a two-week high, while the major stock indices in Mexico and Brazil rallied.
Earlier in the session, the prepared remarks sparked a broad rally in Asia, led by a 2.1 per cent jump in Japan’s Nikkei to a six-month high.
US Treasury debt prices rose, while spot gold prices rose 1.6 per cent to extend gains for a second session. The market initially had a bearish reaction to Yellen’s responses to questions from the committee, “but as her comments have rolled in the market has found a little bit of stability and stocks rallied,” said Ian Lyngen, senior government bond strategist at CRT Capital in Stam-ford, Connecticut. MSCI’s all-country world stock index rose 0.72 per cent, while the pan-European FTSEurofirst 300 index of leading regional shares gained 0.83 per cent to close at a provisional 1,294.27.
The Dow Jones industrial average was up 36.16 points, or 0.23 per cent, at 15,857.79. The Standard & Poor’s 500 Index was up 6.25 points, or 0.35 per cent, at 1,788.25. The Nasdaq Composite Index was down 4.59 points, or 0.12 per cent, at 3,960.99.
Investors view Yellen, along with out-going Fed Chairman Ben Bernanke, as a strong proponent of the Fed’s current ultra-loose monetary policy. They reckon a Fed under Yellen’s leadership will continue stimulus with the goal to lower unemployment and to raise inflation.
The euro fell as the euro zone reported weakening growth, while the dollar touched a two-month highagainst the yen.