Stocks at 21-month highs on hints of US rate increase

WORLD stocks hit 21-month peaks yesterday and the dollar rose for the 11th straight day, after Janet Yellen, the chairperson of the US central bank, flagged a possible interest rate rise next month during upbeat comments on the US economy.

The dollar notched up its longest winning streak in almost five years after Yellen said on Tuesday that the Federal Reserve would probably have to raise rates at an upcoming meeting and that delaying could leave the central bank’s policymaking committee behind the curve.

Propelled by record highs on Wall Street, the MSCI’s benchmark global equity index rose 0.25% to 442.4 points, its highest since May 2015 and two points off its record high. It has not fallen for six sessions, its longest such run since last July.

Europe’s index of leading 300 stocks rose 0.4% to 1 465 points, its highest since December 2015. Germany’s DAX and Britain’s FTSE were both up 0.5%.

“At the margin, you could say that her (Yellen’s) comments were probably tilted slightly towards to the hawkish side, given her upbeat comments around the economic outlook,” Jim Reid, a markets strategist at Deutsche Bank, said.

Yellen’s remarks helped push Wall Street by boosting US bank stocks. Goldman Sachs shares hit a record high, and are up 37% since the US presidential election on November 8.

Financials also led the way in Europe, with Credit Agricole up more than 3% after France’s biggest retail bank beat forecasts with a smaller-than-expected earnings drop in the fourth quarter.

The MSCI’s broadest index of AsiaPacific shares outside Japan was up 0.7%, rising to its highest since July 2015. Japan’s Nikkei added more than 1%, buoyed by a weaker yen.

The dollar index against a basket of major currencies chalked up its longest winning streak since May 2015. It was up 0.2% at 101.220.