An index of global stocks yesterday charged to its highest point since the start of the year, while the dollar weakened, as easing concerns about rising interest rates led investors into riskier assets.
Oil prices climbed, as commodities denominated in dollars became more attractive to users of other currencies. US Treasury prices fell with benchmark yields rising from four-week lows amid selling in safe-haven bonds.
Federal Reserve Chair Janet Yellen said on Tuesday the US central bank should proceed cautiously as it looks to raise interest rates, pushing back on a handful of her colleagues who have suggested another move may be just around the corner.
Ms Yellen’s comments were echoed yesterday by Chicago Fed President Charles Evans, who said there was a high hurdle to raising rates in April, given low inflation.
“You have got the follow through from the Fed. They are taking one of the fears basically off the table at this point in terms of rising interest rates,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
The Dow Jones industrial average was up 101.98 points, or 0.58 per cent, at 17,735.09, the S&P 500 gained 10.18 points, or 0.5 per cent, at 2,065.19 and the Nasdaq Composite added 20.28 points, or 0.42 per cent, at 4,866.91. The pan-European FTSEurofirst 300 index advanced 1.3 per cent.
MSCI’s index of world shares gained 1.4 per cent, putting it into positive territory for 2016. The dollar had hit its highest level in about two weeks against a basket of major currencies at the start of the week, boosted by a series of hawkish comments from Fed officials. But the greenback receded after Ms Yellen’s comments, which pointed to global risks to the US economy.
The dollar fell another 0.4 per cent yesterday. It is down about four per cent this year and on track to post its biggest quarterly percentage decline in five years. The euro rose 0.5 per cent against the dollar.
“(Yellen) seemed very biased towards the dovish side, and the market is taking that as a signal that the Fed is maybe trying to engineer a weaker currency or a more buoyant financial market, or possibly both,” Altana Hard Currency Fund manager Ian Gunner said in London.
US private employers added 200,000 jobs in March, above economists’ expectations, a report by a payrolls processor showed.
Benchmark 10-year Treasury notes were down 10/32 in price for a yield of 1.847 per cent, up 3.5 basis points from late on Tuesday. The 10-year yield hit a four-week low of 1.800 per cent on Tuesday.
US crude prices rose 1.1 per cent to $38.71 a barrel, while benchmark Brent climbed 1.3 per cent to $39.63 a barrel.
“This year’s unusually strong correlation between the stock market and energy futures has been largely inspired by the common support of low to negative rates,” said Jim Ritterbusch of Chicago-based energy markets consultancy Ritterbusch & Associates.