Global stocks and dollar up after Fed, also boosted by strong data

Apple provides boost to markets after sterling quarterly results

PUBLISHED : Thursday, 02 February, 2017, 7:16am
UPDATED : Thursday, 02 February, 2017, 7:16am

Stocks advanced around the globe and the dollar edged higher on Wednesday as strong data suggested the global economy was picking up steam and the Federal Reserve released an upbeat statement on the health of the US economy.

The Fed left rates unchanged in its first meeting since President Donald Trump took office, but its relatively upbeat outlook suggested it was on track to tighten monetary policy this year.

The dollar reduced its gains after the Fed’s decision but remained 0.2 per cent higher, buoyed by strong readings on US employment and manufacturing data.

Fed keeps US rates unchanged, is upbeat on economy

U.S. factory activity hit a more than a two-year high in January and a private payrolls report shot past expectations.

“The market didn’t get any new insights from the statement as far as a trigger for a more hawkish Fed, and that is prompting some minor profit-taking on the dollar, but there is nothing in this Fed statement to change the bigger picture, from our perspective, that underlying US growth remains robust and the Fed will hike 2-3 times over the next 12 months,” said Shahab Jalinoos, global head of FX strategy at Credit Suisse.

US factory, payrolls data point to strengthening economy

Wall Street stocks turned positive after the Fed’s decision on interest rates, but gains were limited in the S&P, which snapped a four-day fall.

The Nasdaq, which is more technology-heavy, was lifted by a 6.1-per cent rise in Apple after the company’s strong earnings and iPhone sales.

The Dow Jones Industrial Average rose 26.85 points, or 0.14 per cent, to 19,890.94, the S&P 500 gained 0.68 points, or 0.03 per cent, to 2,279.55 and the Nasdaq Composite added 27.87 points, or 0.5 per cent, to 5,642.65.

Both the pan-European FTSE 300 and the STOXX 600 indexes ended up around 0.8 per cent.

Euro zone factories registered the fastest activity rate in nearly six years, China’s activity expanded for the sixth month and Japanese manufacturing growth was the fastest in almost three years.

“So far, momentum is pretty strong heading into 2017,” said Jacqui Douglas, Chief European Macro Strategist at TD Securities. “But political risks are definitely one of the biggest this year and, given the surprises we had through 2016, it’s really hard to tell what’s in store.”

The Nikkei added 0.56 per cent and MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.36 per cent.

MSCI’s index of emerging market bourses rose 0.63 per cent.

That all combined to push MSCI’s 46-country All World index up, snapping a four-day losing streak.

US Treasury prices pared losses after the Fed’s statement with benchmark 10-year Treasury notes down 7/32 in price to yield 2.48 per cent.

Prices had earlier slumped after payrolls processor ADP showed strong jobs gains in January, raising expectations that Friday’s closely-watched government employment report will also show strong growth.

Friday’s non-farm payrolls report is expected to show employers added 175,000 jobs last month.

Brent crude futures, the international benchmark, rose 91 cents a barrel to US$56.49, supported by signs that Russia and the Organization of Petroleum Exporting Countries are delivering on promised supply reductions. Oil prices had briefly traded lower after a larger-than-expected build in US crude.

Gold slipped by 0.11 per cent, retracing earlier losses after the release of the Fed’s statement.