Fed-fueled stocks fly, dollar sags; oil nine-month high on Iraq

Thu Jun 19, 2014 5:59am EDT
 
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By Jamie Langer

London(Reuters) - Global stocks and emerging market assets rallied on Thursday after the U.S. Federal Reserve signaled that rising inflation won't trigger an interest rate rise any time soon, while Iraq turmoil sent crude oil futures to their highest this year.

Following the S&P 500's rise to yet another record high on Wednesday, Asian equities posted strong gains - Japan's Nikkei 225 .N225 hit its highest since late January - and European bourses also opened sharply higher.

Investors' sanguine interpretation of the Fed's outlook was reflected in another collapse in market volatility. The VIX measure of implied volatility on Wall Street, the so-called "fear index", and major foreign exchange volatility measures hit 7-year lows.

The big loser in the wake of the Fed's policy statement and Chair Janet Yellen's press conference was the dollar. It fell against major and emerging market currencies, in tandem with U.S. Treasury yields, hitting a five-year low against sterling.

"The Fed managed to navigate through what some had expected to be a potentially tricky announcement by providing further fuel for both equity and Treasury market bulls - quite an achievement given both are already at levels that leave skeptics perplexed," Rabobank analysts said in a note to clients on Thursday.

In early trading Thursday, the FTSEurofirst 300 .FTEU3 index of leading European shares was up two thirds of a percent at 1,396 points.

Germany's DAX .GDAXI was up three quarters of a percent at 10,003 points, within 30 points of its record high. Britain's FTSE 100 .FTSE was up 0.7 percent at 6,825 points and France's CAC 40 .FCHI was also up 0.7 percent at 4,561 points.

The top blue-chip gainer in Europe was Rolls Royce RR.L, with the engine maker up more than 6 percent after it announced a one billion pound ($1.69 billion) share buyback.   Continued...

 
Signage is seen on the London Stock Exchange building in central London on May 21, 2008.  REUTERS/Luke MacGregor