GLOBAL MARKETS-Stocks rally, dollar falls as Fed reassures

Thu Jul 11, 2013 10:35am EDT

* Dollar extends slide, tumbles 1.3 percent after dovish
Bernanke
    * European shares rise, Wall Street stocks open sharply
higher
    * U.S. Treasury prices rise


    By Caroline Valetkevitch
    NEW YORK, July 11 (Reuters) - Global stock indexes rose
sharply while the dollar tumbled on Thursday after Federal
Reserve chief Ben Bernanke signaled the U.S. central bank may
not be as close to winding down its stimulus policy as markets
had begun to expect.
    On Wall Street, stocks briefly jumped 1 percent at the open.
    
    Fed Chairman Bernanke said on Wednesday the overall message
from the central bank was that "a highly accommodative policy is
needed for the foreseeable future." 
    "His statement that they will be highly accommodative for
the foreseeable future is pretty clear and the market loved it,"
said Doug Cote, chief market strategist at ING U.S. Investment
Management in New York. "That statement was very clear and that
is what the market is reacting to, because he is in charge."
    Despite minutes from the Fed's June meeting showing half of
its policymakers think its $85 billion-a-month stimulus program
should be wound down by the end of the year, Bernanke's message
was enough to snap markets back into buying mode.
    U.S. stimulus has kept interest rates low and supported
equity markets, and there is concern in financial markets that
if the Fed unwinds its support too soon, that could slow the
recovery of the world's biggest economy.
    The Dow Jones industrial average was up 120.15
points, or 0.79 percent, at 15,411.81. The Standard & Poor's 500
Index was up 15.62 points, or 0.95 percent, at 1,668.24.
The Nasdaq Composite Index was up 35.95 points, or 1.02
percent, at 3,556.71. 
    MSCI's world index rose 1.5 percent, while
the pan-European FTSEurofirst 300 climbed 0.4 percent
after earlier touching 1,201.79, its highest level since early
June.
    The dollar, which had touched three-year highs before the
Fed's latest meeting minutes on Wednesday, slipped against a
basket of currencies. The dollar index fell to 82.418,
its lowest since June 25 and down around 2.8 percent from the
three-year high of 84.753 touched just two sessions ago. It last
stood at 82.974, down 1.27 percent.
    Large swings in currencies, stocks and bonds over recent
weeks have highlighted the tricky task the Fed and other central
banks face as they try and wean markets off the cheap and easy
money they have provided during the global financial crisis.

    BUCKING THE TREND
    Portuguese, Spanish and Italian bonds and Lisbon's stock
market bucked the wider global move higher as tensions
continued to bubble on the euro zone's debt-strained southern
fringe.
    With Portugal's coalition government teetering, President
Anibal Cavaco Silva urged a cross-party deal with the main
opposition socialists to try and ensure the country keeps to its
bailout deal. 
    Italy was also in the spotlight, and by proxy Spain, after
Rome failed to hit the top of its pre-flagged target in a 3- and
30- year bond sale. That followed this week's rating downgrade
and ongoing political difficulties.  

   
     
    BOND PRICES HIGHER
    U.S. Treasuries prices extended gains briefly after data
showed domestic jobless claims unexpectedly rose in the latest
week, spurring bets the Fed might delay plans to reduce bond
purchases.
    Benchmark 10-year Treasury notes last traded
23/32 higher with a yield of 2.5872 percent, down 8.7 basis
points from late on Wednesday.    
    Commodity markets gained on the view that continuing
stimulus from the Fed and European and Japanese central banks
would support global economic growth.
    Copper prices hit their highest level in nearly a month.
    Three-month copper on the London Metal Exchange rose
to its highest since June 18 at $7,049.25 a tonne in intraday
trade.
    Brent crude dipped after a monthly IEA oil report dampened
bullish sentiment. Brent fell 39 cents to $108.12 a
barrel, while U.S. crude was down $1.16 at $105.36, after
peaking at $107.45 earlier.
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