GLOBAL MARKETS – Equities, dollar rise as Fed officials downplay inflation concerns
By Chibuike Oguh
NEW YORK, May 26 (Reuters) – Global equity markets rose and the US dollar rallied against major currencies on Wednesday for the first time this week, as Federal Reserve officials continued to downplay the outlook for rising inflation.
Fed vice chairman for oversight Randal Quarles signaled the US central bank’s plan to open talks on easing its bond buying program as the economy advances and prices increase. On Tuesday, Vice President Richard Clarida said the Fed could curb inflation and stage a “soft landing” without putting the economic recovery on track.
On Monday, Fed Governor Lael Brainard and James Bullard, Chairman of the St. Louis Fed, reiterated the accommodative monetary policy.
The dollar index = USD was up 0.392%, while benchmark 10-year US Treasury yields US10YT = RR slipped to 1.557%, from 1.564% on Tuesday night.
“The Fed has really pushed its take on inflation, but when it comes to cutting bonds, investors are worried about allowing the economy to heat up,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
The largest MSCI index of global equities rose 0.18% to 708.52. European equities .STOXX were stable below a record high set on Tuesday.
Comments from several Fed officials reflect a change in tone at the central bank. A month ago, Fed Chairman Jerome Powell said it was “not yet” time to consider a discussion of reducing policy or slowing the pace of asset purchases. More recently, policymakers have recognized that they are closer to debating when to reduce crisis support to the US economy.
On Wall Street, the three major indices closed higher on the effect of consumer discretionary .SPLRCD, Communication services .SPLRCL and the financial sectors .SPSY.
The Dow Jones Industrial Average .DJI rose 0.03%, to 34,323.05, the S&P 500 .SPX gained 0.19%, to 4,195.99 and the Nasdaq Composite .IXIC added 0.59% to 13,738.00.
“The Fed always puts a lot of cash into the system and when the economy is booming, a lot of people think they might be making a policy mistake,” Ripley said.
Overnight in Asia, MSCI’s Largest Asia-Pacific Stock Index Outside Japan .MIAPJ0000PUS rose 0.45% to more than two weeks, while Tokyo’s Nikkei .N225 advanced 0.3%.
Emerging market equities strengthened as figures of stronger economic growth in Mexico pushed the peso higher, raising hopes that the country is on its way to recovering from its sharpest economic contraction since the 1930s.
MSCI Emerging Markets Equity Index .MSCIEF increased by 0.48%.
Gold prices fell below $ 1,900 an ounce, its appeal dampened by a rebound in the dollar and yields on US Treasuries.
Cash gold XAU = fell 0.17% to $ 1,896.06 an ounce after hitting its highest level since Jan. 8 at $ 1,912.50.
Oil price set higher as a drop in crude inventories in the United States raised expectations of improving demand ahead of the peak summer driving season, offsetting fears that a possible return of the Iranian supply could cause a glut.
Brent LCOc1settled 16 cents, or 0.3%, to $ 68.87 a barrel and US crude West Texas Intermediate (WTI) CLc1arranged 14 cents, or 0.2%, to $ 66.21 a barrel.
Market capitalization of the MSCI All Country World indexhttp://tmsnrt.rs/2EmTD6j
Global currencies against the dollar http://tmsnrt.rs/2egbfVh
(Reporting by Chibuike Oguh in New York; Editing by Will Dunham and David Gregorio)
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