March 20, 2014 / 5:55 PM / 4 years ago

GLOBAL MARKETS-Wall St shakes off rate concerns; dollar widens gains

* European, Asian, emerging market stocks fall

* Wall St gains after Philly Fed data

* Dollar index at three-week high (Updates prices, adds details)

By Angela Moon

NEW YORK, March 20 (Reuters) - Global equity markets edged lower on Thursday, as investors positioned for a speedier rise in U.S. interest rates than previously thought, but Wall Street traded higher on better-than-expected economic reports.

The dollar powered higher against other major currencies while U.S. Treasuries prices were roughly unchanged.

In her first press conference as chair of the Federal Reserve, Janet Yellen on Wednesday indicated that the first increase in interest rates could come in the first half of 2015.

Yellen said there would be a “considerable period” between the end of the Fed’s bond-buying stimulus and the first rate increase, adding it could be as little as six months. Markets had widely expected a hike in the second half of 2015.

The MSCI world equity index fell 0.3 percent but Wall Street was higher, with the S&P 500 up 0.6 percent.

The Philadelphia Federal Reserve Bank’s business activity index rose far more than expected in March after a contraction in February. In another positive report, U.S. jobless claims rose less than expected.

The data “shows that fundamentals are getting stronger every day, and that strength is getting firmer,” said Frank Davis, director of sales and trading at LEK Securities in New York.

While most U.S. Treasuries yields were little changed from Wednesday’s levels, short-term interest rates continued to rise modestly in the wake of Yellen’s comments.

The 3-year U.S. Treasury note was last down 2/32 in price to yield 0.90 percent, compared to a yield of 0.88 percent late Wednesday. The yield on the 5-year Treasury note was last at 1.72 percent, up from 1.70 percent late Wednesday.

The rise in the 5-year note’s yield to 1.71 percent on Wednesday was the largest one-day rise since July 2013. Bond yields move inversely to their prices.

Shares in Europe fell but major indexes cut losses on data showing robust factory activity in the U.S. mid-Atlantic region. The FTSEurofirst 300 index fell as much as 1 percent. It later trimmed losses to trade 0.3 percent lower at 1,301.34 points.

On Wall Street, the Dow Jones industrial average was up 117.75 points, or 0.73 percent, at 16,339.92. The Standard & Poor’s 500 Index was up 11.32 points, or 0.61 percent, at 1,872.09. The Nasdaq Composite Index was up 18.64 points, or 0.43 percent, at 4,326.24.


The dollar, whose strength this year was one of the big bets of many banks in January, has struggled so far in 2014, weighed down by a rough U.S. winter that has at least temporarily cooled jobs growth. But the Fed’s comments provided a new jolt.

“From this point forward, at least for the time being you will see a firmer tone to the dollar,” said Stephen Gallo, a strategist with Canadian bank BMO in London.

The dollar index, which measures the greenback against a basket of six major currencies, rose to a three-week high of 80.304. It strengthened past resistance around $1.3810 per euro to trade 0.5 percent stronger at $1.3763. The yen fell 0.13 percent to 102.48 yen.

Emerging stocks fell more than 1 percent on Thursday, within sight of their worst level in six weeks.

U.S. crude oil futures fell as builds in domestic stockpiles and a strong U.S. dollar outweighed worries over the possible impact of tougher U.S. sanctions on Russia.

U.S. crude for April delivery, which will expire at the settlement on Thursday, was down 77 cents to $99.60 per barrel. Brent rose 39 cents to $106.24 a barrel. (Editing by Leslie Adler and Nick Zieminski)

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