Global Shares Rally on Relief After Fed Minutes

By Elizabeth Dilts Marshall

NEW YORK (Reuters) – World stock markets broadly rose on Thursday and bond yields eased as no hawkish surprises from the latest U.S. Federal Reserve minutes helped soothe immediate worries over the impact of interest rate hikes on economic growth.

Wall Street extended its rally from Wednesday. By midmorning, all three major U.S. stock indexes were up more than 1%, with consumer discretionary leading the S&P 500 sectors higher.

The MSCI’s benchmark for global stocks was up 1.15% at 10:45 a.m. EDT (1445 GMT). Europe’s pan-regional STOXX 600 equity benchmark index rose 0.74%, while a more subdued mood saw the MSCI’s broadest index of Asia-Pacific shares outside Japan fall 0.01%.

The Dow Jones Industrial Average rose 460.25 points, or 1.43%; the S&P 500 gained 59.69 points, or 1.50%; and the Nasdaq Composite added 196.69 points, or 1.72%.

The minutes of the Fed’s May meeting, released Wednesday, showed a majority backed rate hikes of 50 basis points each in June and July to combat inflation, which eased investor concerns that aggressive steps by the Fed could cause a recession.

“U.S. stocks are rallying as investors viewed both the Fed’s minutes as a commitment to only gradual (tightening) policy to fight inflation and after a few retailers provided optimistic outlooks,” OANDA analyst Edward Moya said.

That positive sentiment was fragile, however, as policymakers appeared to leave themselves room to take more aggressive steps if inflation persists at its current levels.

“The Fed locked itself into delivering a couple half-point rate increases until the Jackson Hole Symposium, and that has removed the risk of aggressive tightening in the short term,” Moya said.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell more than expected last week as the labor market remains tight, while a separate report confirmed the U.S. economy contracted in the first quarter.

In Asia, Chinese blue chips reversed earlier losses to rise 0.25% after struggling to find direction for most of the session, as investors fretted over signs of a slowdown but took comfort in comments from Premier Li Keqiang on stabilizing the ailing economy.

South Korea’s central bank raised interest rates for a second consecutive meeting as it grapples with consumer inflation at 13-year highs.

In foreign exchange markets, the dollar fell closer to the one-month low hit on Tuesday. The dollar index, which tracks the U.S. unit against a basket of major peers, fell 0.088%, with the euro up 0.26% to $1.0708.

U.S. Treasury yields eased. The 10-year yield fell to its lowest level since April and was last down to 2.7505%.

Crude oil extended a cautious rally on signs of tight supply, with U.S. crude up 3.35% to $114.03 per barrel and Brent up 2.59% to $116.98 per barrel.

Gold prices slipped on Thursday as the Fed minutes diminished the metal’s appeal as a safe-haven asset.

Spot gold slipped 0.2% to $1,848.99 per ounce by 10:04 a.m. EDT (1404 GMT). U.S. gold futures also fell 0.28% to $1,841.10.[GOL/]

(Reporting by Elizabeth Dilts Marshall, Danilo Masoni and Andrew Galbraith; additional reporting by Vidya Ranganathan; editing by Emelia Sithole-Matarise and Jonathan Oatis)