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.
European banking stocks rose 1.2 percent .SX7P after global banking regulators agreed on Sunday to ease a new rule on how banks’ leverage ratios are calculated to try to avoid crimping financing for the world economy.
“This is a good news because it will give banks some breathing space. There have been concerns that high ratios would hit banks’ profitability,” said Global Equities’ head of quantitative sales trading David Thebault.
“The fact that euro zone assets lead the gains so far this year is a positive sign. It means that things have greatly stabilized and that the region is not a pariah for global investors as it used to be.”
Investors will keep an eye on the fourth-quarter earnings season, with major U.S. banks including JPMorgan (JPM.N), Citigroup (C.N) and Goldman Sachs (GS.N) announcing results this week. European earnings will gather pace in the last week of the month.
Benchmark 10-year euro zone bond yields were slightly lower on the day while Bund futures prices rose 19 ticks. Italian bond yields fell to 3.9 percent, near an eight-month low hit last week.
The 10-year U.S. yield was stable at 2.8635 percent, slightly above Friday’s lows.
The dollar fell 0.7 percent to 103.24 yen, its lowest level in nearly a month, pulling further away from a five-year high of 105.45 yen set earlier this month.
In commodity markets, gold extended its rally to a one-month peak at $1,254.05 an ounce having climbed 1.5 percent on Friday. Gold is the top performing asset so far this year (link.reuters.com/pat75v).
Oil prices retreated after nations struck a six-month deal with Iran to curb its nuclear program and U.S. President Barack Obama urged Congress not to impose additional sanctions on the country. Nymex oil futures lost 0.7 percent Brent crude fell below $107 a barrel.
Additional reporting by Laurence Fletcher and Blaise Robinson; Editing by Hugh Lawson