Dollar, shares gain on expected delay to Fed tapering

Mon Oct 21, 2013 2:26pm EDT
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By Herbert Lash

NEW YORK (Reuters) - The dollar gained and global equity markets traded at five-year highs on Monday, buoyed by a benign outlook for stocks as investors awaited a backlog of U.S. economic data that may yield clues on when the Federal Reserve will begin to pare its stimulus program.

Wall Street traded near break-even on the realization the U.S. fiscal impasse that was resolved last week by pushing decisions into early next year will likely keep the Fed's bond-buying in place well into 2014, which would be good for stocks.

The United States is enjoying moderate growth with tame inflation, a Goldilocks economic climate that is neither too hot nor too cold but has been distorted by the Fed's intervention.

"I wouldn't bet against the market in the short term. Investors as a group seem to have decided that the Fed is on board for the foreseeable future," said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts. "It's Goldilocks's evil twin."

MSCI's world equity index .MIWD00000PUS, which tracks shares in 45 countries, was up as much as 0.7 percent before flattening, while the FTSEurofirst 300 index .FTEU3 of leading European shares rose 0.23 percent to close at a provisional 1,280.66.

Solid corporate earnings from the likes of Philips (PHG.AS: Quote), whose shares jumped 6.5 percent after the Dutch maker of healthcare equipment and energy-efficient lighting reported a near tripling of its third-quarter net profit, lifted European shares.

The S&P 500 hit a record high early in the session, boosted by gains in Apple (AAPL.O: Quote) after a bullish research note, but lackluster results from McDonald's Corp. (MCD.N: Quote) weighed on the Dow and S&P, which reversed gains to trade slightly lower.

The Dow Jones industrial average .DJI was down 12.54 points, or 0.08 percent, at 15,387.11. The Standard & Poor's 500 Index .SPX was down 0.72 points, or 0.04 percent, at 1,743.78. The Nasdaq Composite Index .IXIC was up 6.72 points, or 0.17 percent, at 3,921.00.   Continued...

Specialist trader Chris Malloy (C) gives a price to traders on the floor of the New York Stock Exchange, October 18, 2013. REUTERS/Brendan McDermid