Stocks rally after Fed official signals slow rate rises

AP News
Posted: Apr 07, 2015 7:33 AM
Stocks rally after Fed official signals slow rate rises

BEIJING (AP) — Global stock markets rallied Tuesday on 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 1.4 percent to 5,144.51 and Germany's DAX was up 1.1 percent at 12,095.43. Britain's FTSE 100 added 1.5 percent to 6,937.96. Futures augured small gains on Wall Street, which had already risen the day before. S&P 500 and Dow futures were each up 0.2 percent.

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 percent, 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 favorable inflation outlook.

ASIA'S DAY: The Shanghai Composite Index rose 2.5 percent to 3,961.38 and Tokyo's Nikkei 225 added 1.3 percent to 19,640.54. Sydney's S&P/ASX 200 climbed 0.5 percent 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 percent to 28,332.83. Hong Kong was closed for a holiday.

ENERGY: Benchmark U.S. crude sank 40 cents to $51.74 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1 on Monday to close at $52.14.

CURRENCIES: The dollar gained to 119.95 yen from Monday's 119.48 yen. The euro fell to $1.0872 from the previous session's $1.0937.