World stocks stay high on Fed signals
MARKETS ALSO RIDING ON EUROZONE-GREECE DEAL, CHINA DATA
World stocks stayed within reach of an all-time high yesterday as investors welcomed comments from Federal Reserve Chair Janet Yellen suggesting that the US central bank is in no rush raise interest rates.
Markets, still on a high after the Eurozone agreed to extend Greece’s aid deal, were also supported by slightly better than expected Chinese factory activity data.
But Wall Street was expected to see the S&P500 and Dow ease off their latest record highs.
European bourses were also happy to take a breather after six days of unbroken gains and a surge since the start of the year that has seen the benchmark FTSEurofirst 300 race up roughly 17 per cent.
Following Wall Street’s gains on Tuesday and more rises in Asia overnight, however, MSCI’s 46-country world index was up 0.1 per cent at 433.29 points and straining for the 434.24 all-time peak it scaled in September. “All the stars have been aligned recently, we have had the lower euro, the lower oil, and the lower cost of funding,” said Didier Duret, chief investment officer at ABN Amro.
“For the rally to continue we now need two things. The recovery has to be driven by hard facts, the consumer and manufacturing. And we need the hope that the Fed won’t be too aggressive with hiking rates, and yesterday we got that message.”
Massive stimulus
Global stocks have been on a red-hot run as last year’s slump in oil and energy prices added to the already massive stimulus provided by the world’s major central banks via record low interest rates.
Fed chief Yellen bolstered the view that there would be little change in that. She told Washington’s Senate Banking Committee that the bank was preparing to consider rate hikes “on a meeting-by-meeting basis” but that it would provide markets with clearer signals before it moved.
That marked a subtle change in how the Fed speaks about its plans, suggesting that although a hike could still come as early as June, later is also possible in view of weak US inflation and a sluggish global economy.
The dollar had dropped in the wake of Yellen’s comments overnight and was just starting to halt the slide as the start of US trading approached.
It had clawed its way back to 118.88 yen and was almost flat against the euro at $1.1350 although it was still struggling against sterling at $1.5481.