LONDON (Reuters) – The world's stocks rose, global bond yields fell and the dollar weakened after the Federal Reserve Mayor Jerome Powell had strengthened expectations that the Fed would cut US interest rates soon.
FILE PHOTO: People walk through the lobby of the London Stock Exchange in London, United Kingdom August 25, 2015. REUTERS / Suzanne Plunkett / File Photo
The European STOXX 600 climbed 0.2% after losing 1.4% over the past four sessions. Germany's DAX futures rose and the UK's FTSE futures rose 0.3%. The oil and gas sector as well as defensive shares led to the gain.
In its first testimony before Congress on Wednesday, Powell confirmed that the US economy was still threatened by disappointing factory activity, domestic inflation and a staggering trade war, saying the Fed was ready to "act as appropriate".
"Powell's statement confirmed that we are moving towards a cutting cycle," said Charles Zerah, a fund manager in Carmignac. "The main issue now is, investors are pricing too much in terms of interest rate reduction at the turn of the year? How do you see the stock markets behave is the risk that what markets are pricing can lead to disappointment."
Europe's gains follow healthy increases in Asia, where MSCI's widest Asia-Pacific stock index from Japan increased 1%. Japanese Nikkei la to 0.5%.
U.S .. futures pointed to a stronger opening for Wall Street also with the E-Minis for S & P500 of 0.2%.
U.S .. stocks ended higher on Wednesday, and the S & P 500 crossed cards over 3,000 points for the first time after Powell's comments.
Someone asked how much speed was behind the last rally.
"We're in the camp and been all year round, and no doubt wrong, the Fed is getting more creepy and cut rates, is not good for risk benefits," said Neil Dwane, global strategist and portfolio manager at Allianz Global Investors. Nine of 12 Fed-rate cutting cycles had not stopped a recession, he noted.
"Given we are in the longest expansion and have only lifted to 2.5%, to me that is the question, is a soft landing possible?"
A strong June US job report earlier this month increased expectations the Fed was more likely to cut by 25 basis points than by 50. But Powell's cautious attitude helped to provide gasoline bets on heavier easing at their next policy meeting on July 30-31.
The possibility of a 50 bps cut rose to 27.6% from 3.3% on Tuesday, according to the CME Group's FedWatch tool.
However, minutes from the Fed's last meeting, in mid-June, showed that some policemen felt that it was not a strong case for relief.
The price outlook also weighted on the dollar. The dollar index against a basket of six major currencies dropped 0.2% to 96.929, and widened the losses for a second straight session after reaching a three-week peak on Tuesday.
The dollar was down 0.4% at 108.03 yen, forced by a six-week high at 108,990 the previous day. There was still some distance from a six month trough of 106,780 sets on June 25. The euro broke up 0.23% to $ 1.11275.
In the fixed income markets, the 10-year US tax return fell to 2.037% after beating on Wednesday from a three-week high of 2.113%.
Government bond yields in the euro area also fell. Germany's 10-year government bond yield dropped to 0.32% on the expectation that monetary easing in the euro area would not be far behind the Fed.
In commodities, US crude oil futures managed to six weeks high as oil rigs in The Gulf of Mexico was evacuated before a storm, while an event with a British thought in the Middle East highlighted ongoing tensions in the region.
U.S .. crude futures got 42 cents to trade at $ 60.84 per barrel. Burnt raw futures rose 47 cents to $ 67.48.
Spot gold was achieved at $ 1,426 an ounce, the highest since July 3, at the heightened expectations of a Fed price cut.
Reporting Karin Strohecker; additional reporting by Sujata Rao and Marc Jones in London, Shinichi Saoshiro in Tokyo; editing by Larry King