World stocks rose and the dollar sank to a seven-week low on Thursday after minutes of the U.S. Federal Reserve’s latest meeting showed policymakers were divided over whether to raise interest rates soon.
Recent comments from Fed officials suggested another rate rise in the world’s largest economy could be on the cards as soon as next month, but signs of restraint within the committee brought relief to markets sending global bond yields lower.
“No news is good news,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale.
“With little clarity on the timing of the next rate hike in the minutes of the July meeting, bonds rallied, the dollar
fell and risky asset recovered.”
Europe’s main bourses all followed Asian stocks higher, climbing 0.3-0.4 percent to break off from a losing streak suffered at the start of the week. [.EU]
The MSCI’s 46-country All World index .MIWD00000PUS climbed 0.2 percent to head back towards a one-year high, hauled up by a 0.7 percent rise in Asian shares, its biggest rise since August 8. .MIAPJ0000PUS
Japan’s Nikkei .N225 broke the trend though, dropping 1.5 percent after data showed exports from the country falling at their fastest pace since the financial crisis.
The fall in the dollar dominated currency market moves.
The dollar’s index against a basket of six major currencies .DXY fell to 94.385, its weakest since June 24 when the results of Britain’s shock vote to leave the EU dealt a fresh blow to the outlook for the global economy.
The euro was 0.3 percent higher at $1.1320 EUR=, having hit a 7-week high of $1.13285 while even the struggling British pound was trading well above $1.30 GBP=D4.
Global bond yields fell with Europe’s benchmark, 10-year German yields, down 3 basis points at minus 0.08 percent DE10YT=TWEB.
U.S. money market futures showed traders reducing bets on the timing of rate hikes. CME Group’s FedWatch tool implied traders saw a 47 percent chance of a rate rise, down from 58 percent shortly before the release of the minutes.
The July meeting’s minutes published on Wednesday showed that Fed policymakers were generally upbeat about the U.S. economic outlook and labour market. But they also said they wanted to “leave their policy options open” as any slowdown in hiring would argue against near-term monetary tightening.
“Right now, observers think a September policy rate hike is off the table,” Richard Clarida, global strategic advisor at bond giant PIMCO, wrote in a blog.
The weaker dollar was an additional help to commodities like crude oil, where prices were otherwise being depressed by the prospect of record Saudi output.
International Brent crude oil futures LCOc1 were marginally up 0.1 percent at $49.89 per barrel at 0800 GMT, reversing earlier falls.
Copper, which had slid on the dollar’s rise earlier in the week, trimmed some of its losses as the U.S. currency flagged.
Benchmark copper on the London Metal Exchange CMCU3 extended gains to be up 1 percent at $4,824 a tonne after losing 0.8 percent on Wednesday.