Global stocks surge as Yellen appears to put off rate hike

AP News
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Posted: Jun 07, 2016 8:09 AM
Global stocks surge as Yellen appears to put off rate hike

LONDON (AP) — Global stocks rallied Tuesday after U.S. Federal Reserve Chair Janet Yellen hinted that an interest rate increase next week is unlikely in light of a weak U.S. jobs report and uncertainties surrounding the U.S. and world economies.

KEEPING SCORE: In Europe, Germany's DAX soared 1.9 percent to 10,308 while the CAC-40 was up 1.3 percent at 4,482. The FTSE 100 index of leading British shares was up a more modest 0.5 percent at 6,304. U.S. stocks were poised for solid gains, with Dow futures and the broader S&P 500 futures up 0.6 percent.

ALL ABOUT YELLEN: Traders have taken their cue from a speech Monday by Yellen in which she appeared to rule out an interest rate increase at next week's meeting of the central bank's policymaking body. Though she said the U.S. economy was fundamentally strong despite last week's surprisingly weak jobs data for May, she shied away from sketching any timetable for when the Fed might raise interest rates again because of a myriad of uncertainties, including low inflation and the uncertainty over a British vote on June 23 on whether to leave the European Union.

ANALYST TAKE: "It was no surprise to hear Fed chief Janet Yellen pretty much rule out the prospect of a move in June," said Michael Hewson, chief market analyst at CMC Markets. "What was notable from Yellen's comment yesterday was the absence of any comment relating to a summer rate rise, contrasting with her comments a couple of weeks ago, which would suggest that in the absence of a strong rebound in the June payrolls numbers, the earliest we could get a move on rates is likely to be September, if at all, given the proximity of the U.S. election."

UP AND DOWN POUND: The British pound continues to trade in an extremely volatile manner, sent one way and then the other by a daily diet of opinion polls on the referendum result. On Tuesday, it rose 0.9 percent to $1.4568 after a couple of polls showed the "remain" camp ahead. Over recent days, the polls have shown rising support for the "leave" campaign and that's prompted a bout of jitters in the markets as traders fret over the uncertainty of a so-called Brexit. "The pound continues to find itself buffeted by the shifting sands of the latest Brexit polls," said CMC Markets' Hewson.

ASIA'S DAY: Tracking Monday's performance by U.S. stocks, Asian stock markets posted strong gains earlier. Japan's Nikkei 225 rose 0.6 percent to 16,675.45 while South Korea's Kospi gained 1.3 percent to 2,011.63. Hong Kong's Hang Seng Index advanced 1.4 percent to 21,328.24. The Shanghai Composite Index in mainland China turned 0.1 percent higher at 2,936.04.

OIL: Benchmark U.S. crude oil gained 59 cents to trade back above $50 a barrel at $50.28 in electronic trading on New York Mercantile Exchange. The contract rose $1.07, or 2.2 percent, to $49.69 a barrel on Monday, its highest closing price this year. Brent crude, which is used to price international oils, added 72 cents to $51.27 a barrel in London.

CURRENCIES: The euro was down 0.1 percent at $1.1345 while the dollar rose 0.2 percent to 107.74 yen.