Dollar firms on expectations for December.
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The rise in USA bond yields came even as expectations on the Federal Reserve’s monetary policy outlook hardly changed.
NEW YORK, Sept 15 (Reuters) – Global equity prices gained on Thursday after weak US retail sales data undermined the argument that the Federal Reserve will raise interest rates next week.
Bond markets have come under pressure in recent days from unease about a possible US rate hike this month, news that the Bank of Japan is studying ways to steepen the bond yield curve and disappointment at the lack of clear forward-action plan by the European Central Bank at last week’s meeting.
The dollar index was steady at 95.603 following an overnight gain of 0.25 percent, with a rise in USA long-term bond yields to a three-month high buoying the greenback. That followed gains on Thursday of as much as 2.5 percent as renewed risk appetite stemmed a two-day rout.
Expectations that the Fed will wait longer to raise rates is causing the long bond to underperform as lower rates are likely to boost inflation longer-term, which erodes the value of the debt.
Financial markets are pricing in a roughly 12 per cent probability of a rate hike next week, down from 15 per cent before the data, according to the CME FedWatch tool.
European markets were set for a better start, however, with the FTSE 100, DAX and CAC expected to open between 0.3 percent to 0.6 percent higher. It’s not too hot, it’s not too cold.
The Dow Jones industrial average rose 141.62 points, or 0.79 percent, to 18,176.39, the S&P 500 gained 16.8 points, or 0.79 percent, to 2,142.57 and the Nasdaq Composite added 56.39 points, or 1.09 percent, to 5,230.16.
MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS rose 0.15 percent.
“With escalating uncertainty surrounding the USA and Japan’s monetary policies, there’s a deep-rooted yearning to cut down on any long position in stocks”, Mitsuo Shimizu, deputy general manager at Japan Asia Securities Group, told Bloomberg News.
The Aussie hit a almost seven-week low against the dollar on Tuesday of US$0.7443, but last traded slightly higher against the greenback at US$0.7471.
In currency markets, the USA dollar held firm against a basket of major currencies after traders looked ahead to a potential rate increase from the Fed in December and sold yen on anticipation the Bank of Japan could ramp up stimulus next week.
The Bank of Japan and U.S. Federal Reserve both meet next week.
The BOJ plans to make its controversial negative interest rate policy the centerpiece of future monetary easing, promising to weigh further rate cuts as expansions to asset buying near their limits, the Nikkei newspaper reported on Wednesday.
The prospects of a US rate hike by the year-end helped to underpin the dollar against other currencies.
Gold slipped as the dollar edged upward.
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The euro inched up 0.1 per cent to US$1.1248 (RM4.65), en route to eke out a 0.1 per cent weekly gain.
