Reassuring Fed gets markets off to solid second-quarter start

Tue Apr 1, 2014 11:34am EDT
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By Marc Jones

LONDON (Reuters) - Investors took reassurance from remarks by the head of the Federal Reserve and stronger-looking emerging markets helped keep a world stocks rally alive on Tuesday in a solid start to the second quarter.

Wall Street looked set for a firm opening as major currencies and bonds kept up their cautious jockeying before this week's European Central Bank meeting and U.S. jobs data.

A flurry of merger-and-acquisition activity had helped enliven the wait for European bourses, as a 0.4 percent rise put them on track for a sixth straight day of gains after they faltered in February and March.

Global shares were also supported by Fed Chair Janet Yellen, who reinforced the need for "extraordinary" commitment to support the U.S. economy.

Her comments, appearing to reduce the chances of early interest rate rises, helped keep a lid on the dollar which in turn eased the euro off its recent lows to $1.3796.

The euro remained hampered though by talk the European Central Bank, which meets on Thursday, may have to cut interest rates again in coming months to keep deflation at bay.

Worryingly for policymakers, Markit's Purchasing Managers' Index on Tuesday showed that despite growth in all corners of the euro zone, companies have resumed cutting prices to drum up business.

Echoing an IMF warning on Monday, EU Economic and Monetary Affairs Commissioner Olli Rehn said he was anxious about decelerating inflation.   Continued...

The curve of the German share price index DAX board is pictured at the Frankfurt stock exchange March 28, 2014. REUTERS/Remote/Stringer