Stocks firm as Fed-fired volatility cools; dollar firm

Fri Nov 22, 2013 8:48am EST
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By Richard Hubbard

LONDON (Reuters) - World shares were set to end a volatile week firmer on Friday and the dollar hovered near a 4-month high against the yen as worry dissipated about an early Fed move to start winding down its stimulus policy.

U.S. stock index futures signaled that Wall Street was unlikely to advance much further after the Dow Jones closed above 16,000 for the first time ever on Thursday. .N

The volatility has cooled as more investors realize that a Federal Reserve move to scale back its bond-buying program, which will probably begin in the first quarter of next year, does not necessarily mean official interest rates will rise soon afterwards.

"People have got the message," said Laurent Fransolet, head of European fixed-income strategy at Barclays. "Everyone is starting to differentiate between tapering and tightening."

Solid U.S. data this week has also eased concern that weaker growth in China and the euro zone may set back the fragile global economic recovery, pointing to a gradually improving outlook for 2014 albeit with less Fed money printing.

The mounting investor confidence over the outlook had lifted the MSCI's global benchmark for shares .MIWD00000PUS by 0.2 percent on Friday though it was barely changed over the week.

Earlier MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent after shedding 1.4 percent on Thursday. Japan's Nikkei .N225, getting an extra boost from the weaker yen, added 0.1 percent to edge close to its highest level of the year.

"The markets have got a lot of liquidity and it's going to be a gentle lift for equities," said Mike Gallagher, managing director at IDEAglobal. "We might see it slow waiting for the U.S. employment report (due December 6) and the December meeting of the Fed."   Continued...

A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett