November 20, 2013 / 10:54 AM / 5 years ago

Shares tick up ahead of Fed minutes, gold falls

NEW YORK (Reuters) - The euro fell on Wednesday while stock markets around the world were little changed after a report that the European Central Bank was considering a negative deposit rate.

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

Citing unnamed sources, Bloomberg reported that the ECB was considering making banks pay to deposit cash with it overnight, and that if it decides to take the deposit rate into negative territory from the current level of zero, it would consider an interest rate of -0.1 percent.

The euro fell to its lows of the day while the U.S. dollar index .DXY rose 0.2 percent to its highs of the day.

Equity investors were looking ahead to upcoming comments from the U.S. Federal Reserve, which was expected to confirm that its stimulus would remain in place, while the euro slumped after a report.

The program, as well as similar programs from other major central banks, has fueled equity gains in 2013, taking Wall Street to repeated all-time highs and other regions to multi-year highs.

Fed Chairman Ben Bernanke set the tone late on Tuesday for what is expected to be a cautiously upbeat assessment from the Fed minutes, saying the U.S. central bank would keep monetary policy ultra-easy as long as needed.

“There’s been talk that tapering is coming soon. Maybe this takes some pressure off” the market, said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois.

While the Fed’s accommodative monetary policy is expected to provide a floor under equities for as long as it continues, questions about when it will start to be slowed have tempered some buying enthusiasm. In addition, the size of the rally has market participants seeking new catalysts in an environment marked by signs of tepid economic growth.

The MSCI world share index .MIWD00000PUS fell 0.1 percent, while European shares .FTEU3 rose 0.1 percent.

The Dow Jones industrial average .DJI was up 12.10 points, or 0.08 percent, at 15,979.13. The Standard & Poor’s 500 Index .SPX was up 3.33 points, or 0.19 percent, at 1,791.20. The Nasdaq Composite Index .IXIC was up 11.86 points, or 0.30 percent, at 3,943.41.

U.S. equities were also boosted by data showing consumer spending rose more than expected in October, while consumer prices unexpectedly fell.

“Strength in the economy and subdued inflation pressures mean the Fed doesn’t have to rush to reduce its stimulus,” Jankovskis said.

Among other asset classes, Brent crude rose 0.9 percent. Gold prices fell 0.9 percent on the day while copper was up 0.3 percent.

The benchmark 10-year U.S. Treasury note was up 1/32, the yield at 2.7068 percent. The dollar fell 0.2 percent against the yen.


In Britain, now the best-performing of Europe’s big economies, the Bank of England also published minutes from its latest meeting, saying the country is in a sustained recovery and there are no major inflation risks. The BOE also stressed it was in no rush to raise interest rates.

Sterling initially cut early gains, while UK government bonds and shares pared losses. But the impact proved to be short-lived and was soon reversed.

In another closely watched move, the Chinese central bank set the yuan’s mid-point for Wednesday trading at 6.1305 per dollar, its highest since the landmark revaluation in 2005.

Zhou Xiaochuan, head of the People’s Bank of China, said in a book about the reforms published on Tuesday that China will gradually expand the yuan’s foreign exchange trading band to make the currency more flexible and market-driven.

That does not necessarily mean China will move the trading band overnight, but some analysts think the yuan could gain in the near term on speculation of a wider trading band. For the wider market, it should mean Beijing is less likely to buy U.S. dollars to keep its currency in check.

The yuan was little changed in onshore trading, changing hands at 6.0923 per dollar compared with 6.0927 at the local close on Tuesday.

Editing by Dan Grebler

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