Equities hit 21-month peak
london — World stocks hit 21-month peaks on Wednesday and the dollar rose for the 11th straight day, after Federal Reserve Chair Janet Yellen 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 the Fed would probably need 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, MSCI’s benchmark global equity index rose 0.25 per cent 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 per cent to 1,465 points, its highest since December 2015. Germany’s DAX and Britain’s FTSE were both up 0.5 per cent.
“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,” said Jim Reid, markets strategist at Deutsche Bank.
Yellen’s remarks helped push Wall Street by boosting US bank stocks. Goldman Sachs shares hit a record high, and are up 37 per cent since the US presidential election on November 8. Financials also led the way in Europe, with Credit Agricole up more than three per cent after France’s biggest retail bank beat forecasts with a smaller than expected earnings drop in the fourth quarter.
MSCI’s broadest index of AsiaPacific shares outside Japan was up 0.7 per cent, rising to its highest since July 2015. Japan’s Nikkei added more than one per cent, 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 per cent at 101.220, near a four-week high of 101.380 scaled overnight.
Yellen’s remarks rekindled expectations in some quarters for the Fed to raise rates three times in 2017 rather than twice. The futures market did not share this view amid doubts about the US economy’s ability to sustain three hikes.
According to CME Group’s FedWatch data, US interest rate futures implied an around 30 per cent chance of at least three increases this year, little changed from the previous day — though the chance rose above 40 per cent immediately after Yellen’s comments. — Reuters