Global equity markets advanced yesterday and the dollar inched higher as investors bet the new head of the US Federal Reserve will steer a steady course on monetary policy when he addresses lawmakers this week.
US Treasury yields fell as traders reduced bearish bond positions ahead of new Fed Chairman Jerome Powell’s testimony before Congress today that will be his first major address since taking over from Janet Yellen earlier this month.
Euro zone government bond yields also drifted lower as investors awaited a speech by European Central Bank chief Mario Draghi and a flash estimate of euro zone inflation data for February that is due tomorrow.
Technology shares and Warren Buffett’s Berkshire Hathaway drove gains on Wall Street while consumer staples and healthcare stocks pushed European bourses higher, led by Novartis, Unilever and Nestle.
Most traders believe Powell will stay the course and gradually raise interest rates despite indications inflation is perking up.
“There’s some talk of (Powell) being a little more open to tolerating inflation running above the 2 percent target. The focus will be to see if he is indeed open to that and the rationale behind it,” said Aaron Clark, portfolio manager at GW&K Investment Management.
MSCI’s gauge of equity market performance in 47 countries gained 0.35 per cent and the pan-European FTSEurofirst 300 index of leading regional shares rose 0.39 per cent.
On Wall Street, the Dow Jones Industrial Average rose 164.86 points, or 0.65 per cent, to 25,474.85. The S&P 500 gained 9.32 points, or 0.34 per cent, to 2,756.62 and the Nasdaq Composite added 30.19 points, or 0.41 per cent, to 7,367.58.
Equity markets rose earlier in Asia, with Chinese stocks closing 1.2 per cent higher after the ruling Communist Party set the stage for President Xi Jinping to stay in office indefinitely.
The dollar rose in choppy trade as the prospect the Fed will raise rates more than the three times it has signalled for 2018 has bolstered the US currency the past few weeks.
“If Powell suggests that the Federal Reserve could raise US interest rates four times in 2018, it could be seen as a positive sign for the US dollar,” said Jameel Ahmad, global head of currency strategy and market research at online brokerage FXTM.
Oil prices rebounded, supported by comments from Saudi Arabia that it would continue to curb shipments in line with the effort by the Organization of the Petroleum Exporting Countries to cut global supplies.
US crude rose 29 cents to $63.84 per barrel and Brent gained 23 cents to $67.54 per barrel.