Global stocks rise as Fed rate path reassessed; banks rally

Mon Jan 13, 2014 8:07am EST
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By Natsuko Waki

LONDON (Reuters) - World stocks rose towards a six-year high on Monday and the dollar and bond yields slipped as last week's surprisingly weak U.S. jobs data strengthened the case for the Federal Reserve to keep interest rates low for longer.

Emerging markets were one of the biggest beneficiaries, having previously been under pressure as investors took funds away from those economies most reliant on external funding back into the recovering developed world.

Banking stocks rallied in Europe after regulators agreed to ease a new rule on how banks' leverage ratios are calculated.

Friday's data showed the U.S. economy posted its weakest monthly job growth in three years in December. This triggered a slide in U.S. Treasury yields, where the benchmark rate posted its biggest one-day drop since October.

The report did not change expectations that the Fed would wind down its bond-buying program by the end of the year, but interest rate futures markets pushed back the timing of the first rate hike towards late 2015 from mid-2015.

"The market is taking its leads from U.S. Treasury markets, which are generally weighing on the dollar across the board," said Adam Cole, global head of FX strategy at RBC Capital Markets.

MSCI world equity index .MIWD00000PUS gained 0.2 percent, approaching a six-year high set last month, buoyed by a 0.9 percent rise in emerging stocks .MSCIEF.

European stocks .FTEU3 rose 0.1 percent, staying hear a 5-1/2 year peak. Japan was closed for a public holiday.   Continued...

People walk past an electronic information board at the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth