BEIJING, China – Global stock markets were buoyed Tuesday by expectations the U.S. Federal Reserve will put off an interest rate hike until late in the year.
KEEPING SCORE: In Europe’s first day of trading since Easter holidays, France’s CAC-40 gained 1.1 per cent to 5,129.53 and Germany’s DAX was up 1 per cent at 12,088.81. Britain’s FTSE 100 added 1.2 per cent to 6,917.36. Futures augured a flat start to Wall Street’s session. S&P 500 futures were little changed at 2,072.40 On Monday, the S&P 500 and Dow both gained 0.7 per cent and the Nasdaq composite rose 0.6 per cent.
RATE SIGNAL: Investors were reassured by a comment from William Dudley, president of the Federal Reserve’s New York branch, that rate increases will be “shallow.” That added weight to the belief that the Fed will wait until the last quarter of the year before raising its key interest rate. The Fed has held rates at near zero since the financial crisis, helping to fuel a rally in stock markets.
THE QUOTE: Dudley’s comment that a negative reaction by stock markets to an interest rate hike would “slow us down” was confirmation the Fed has used monetary policy to create a “wealth effect,” said Evan Lucas of IG Markets in a report. “It’s a simple idea: make people feel wealthier and they will consume more,” Lucas said. “It is why the market is pricing in an October move and why most now believe, as Mr. Dudley himself stated, that the rate rise will be shallow.”
CENTRAL BANKS: Australia’s central bank left its key interest rate unchanged at 2.25 per cent, ruling out further stimulus at least temporarily despite growing expectations for a rate cut. The bank noted that energy prices have fallen and lending to Australian businesses is growing. The bank left open the door for a rate cut later this year, saying “further easing of policy may be appropriate over the period ahead” to foster growth. India’s central bank also left its leading policy rate unchanged, taking a break after two quarter point in January and March. The Reserve Bank of India cited a strengthening economy and favourable inflation outlook.
ASIA’S DAY: The Shanghai Composite Index rose 2.5 per cent to 3,961.38 and Tokyo’s Nikkei 225 added 1.3 per cent to 19,640.54. Sydney’s S&P/ASX 200 climbed 0.5 per cent to 5,926.00. Taipei, Singapore, Jakarta and Bangkok also rose. Seoul’s Kospi was steady at 2,047.03 and India’s Sensex declined 0.6 per cent to 28,332.83. Hong Kong was closed for a holiday.
ENERGY: Benchmark U.S. crude sank 80 cents to $51.34 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1 on Monday to close at $52.14. Brent crude, used to price international oils, shed 55 cents to $57.57 per barrel in London after soaring $3.17 on Monday to $58.12.
CURRENCIES: The dollar gained to 119.95 yen from Monday’s 119.48 yen. The euro fell to $1.4862 from the previous session’s $1.0937.