GLOBAL MARKETS-Shares, bonds rally, dollar tumbles after Fed cools taper talk

Thu Jul 11, 2013 5:55am EDT

* Dollar tumbles 1.2 percent after dovish Bernanke
    * European shares rise almost 1 percent, Asian stocks gain
    * German Bunds track U.S. Treasuries higher
    * Commodities from oil to copper see gains

    By Marc Jones
    LONDON, July 11 (Reuters) - Shares and bonds rallied
globally on Thursday and the dollar tumbled after the head of
the U.S. central bank signalled it may not be as close to
winding down its stimulus policy as markets had begun to think. 
  
    Fed Chairman Ben Bernanke said on Wednesday the overall
message coming from the central bank was that "a highly
accommodative policy is needed for the foreseeable future."
 
    Despite minutes from the Fed's June meeting showing half of
its policymakers think its $85 billion-a-month stimulus
programme should be wound down by the end of the year, his
message was enough to snap markets back into buying mode.
    European bonds from Germany to Greece tracked gains in U.S.
debt and European shares climbed almost 1 percent to 
push MSCI's world index to its highest in almost
a month.
    "Bernanke's comments were taken by the markets as much more
dovish so I suspect it will be a good day for risk markets,"
said Saxo bank Chairman and senior market analyst Nick Beecroft.
 
    "We are still in a bit of a sweet spot for equity markets.
The economy is doing well enough to encourage equity markets
about future earnings, but not too hot to cause the Fed to
remove accommodation."
    The dollar, which had touched three-year highs before
Wednesday's Fed remarks, tumbled 1.2 percent against a basket of
major currencies, while the euro roared to a three-week
high of $1.32085 before easing to $1.3042 by 0920 GMT.
    The big stock and bond swings over the last few weeks have
highlighted the tricky task the Fed and other central banks have
as they try and wean markets off the cheap and easy money they
have provided during the global financial crisis.
    "Communication is a real challenge for the Fed so brace for
further whipsaws on Bernanke's semi-annual testimony (next
week)," said Sean Callow, a currency strategist at Westpac.   
    HSBC currency analyst Daragh Maher said there had actually
been very little difference in Bernanke's wording compared with
last month's Fed press conference, and that the volatility was
down to markets' habit of overreacting.
    "The things he said were almost exactly the same... A mixed
emphasis from the market is what we are really seeing rather
than it being a mixed message from the Fed." 
    
    EMERGING RELIEF
    Relief was also evident in emerging markets, some of the
hardest hit by the idea of a change in tack in global monetary
policy, with emerging equities and currencies rising including
the recently-battered Turkish lira.
    Commodity markets took a boost from the prospect of
sustained support by the Fed, along with European and Japanese
central banks, supporting global economic growth.  
    Copper prices gained 3.2 percent to exceed $7,000 a
tonne, hitting a three-week high. Gold climbed 2.7
percent to a three-week high and was on track for a fourth
straight day of gains while U.S. crude oil prices added
0.7 percent to their highest level since March 2012.
    Commodity currencies also jumped, with the Australian dollar
climbing as high as $0.9306, further off a 34-month
trough of $0.9036 plumbed just last week. It was helped by a
surprise increase in Australian employment in June, which may
lessen any near-term risk of more interest rates cuts.
 
    But as the yen strengthened, Tokyo's Nikkei share average
 underperformed other Asian markets, up 0.4 percent.
    The Bank of Japan kept monetary policy steady at its latest
meeting but said an economic recovery was underway, its most
optimistic view in 2-1/2 years reflecting the positive impact of
a weakening yen and its massive stimulus plan.
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