Stocks rally, dollar gains on central bank stances

Tue Jan 13, 2015 11:47am EST
 
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By Herbert Lash

LONDON (Reuters) - Global equity markets surged and the dollar hit a nine-year high on Thursday, lifted by the Federal Reserve's confidence in the U.S. economy and hopes of aggressive new stimulus in Europe.

Stocks on Wall Street rose about 1.7 percent and in Europe equities jumped close to 3 percent as investors' set aside fears from a few days ago that the collapse in oil prices indicated a slowing global economy.

Brent oil fell and U.S. crude tipped lower, trading near break-even, while prices for U.S. and German government debt fell, on the growing confidence the European Central Bank will launch a bond-buying program to combat slowing economic growth.

In the latest sign of a strong U.S. economy, the number of Americans filing new claims for unemployment benefits fell last week and job cuts declined sharply in December, suggesting a tightening labor market.

In Europe, the president of the ECB said the bank's Governing Council stands ready to take unconventional measures if needed to stem a prolonged period of low inflation.

In minutes released on Wednesday from its December policy-setting meeting, the Fed appeared to firmly conclude that the U.S. recovery is here to stay, despite a global deflation threat and potential turmoil from plunging oil prices.

"The decline in the price in oil, sure it spoke volumes about potential headwinds for the global economy," said Andrew Wilkinson, chief market strategist at Interactive Brokers LLC in Greenwich, Connecticut. "But it seems as ever investors are more optimistic about the likely response from global central banks and that turned confidence around."

MSCI's all-country world stock index .MIWD00000PUS rose 1.86 percent, while the FTSEurofirst 300 index .FTEU3 of top European shares surged 2.91 percent to close at a 1,368.85 points. The German .GDAXI, French .FCHI and Italian .FTMIB stock market indexes each rose more than 3 percent.   Continued...

 
A man walks past the London Stock Exchange in the City of London October 11, 2013.  REUTERS/Stefan Wermuth