Global markets: stocks climb, gold price suffers as rate hike worries ease

February 24, 2018

London (Feb 24)  Shares rose broadly worldwide on Friday, with strong technology stocks and a retreat in Treasury yields lifting Wall Street, while gold had its biggest weekly loss this year as investors shrugged off concerns about interest rate hikes. The dollar edged higher as investors positioned for a more aggressive Federal Reserve to raise US interest rates three times this year.

In its semiannual report to Congress released Friday, the Fed's Washington-based Board of Governors looked past a recent stock market sell-off and inflation concerns, saying it sees steady growth continuing and no serious risks on the horizon that might pause its planned pace of rate hikes.

US Treasury yields fell as uncertainty about the recent stock market volatility helped boost bond demand and investors rebalanced portfolios near the month end. “Certainly bond yields pulling back today is helpful for stocks, at least for the short term; that has been the narrative that is out there - that higher bond yields are weighing on stocks,” said Willie Delwiche, investment strategist at Baird in Milwaukee. So moving away from that, for today at least, provides a bid for equities.”

Benchmark 10-year US Treasury notes were last up 14/32 in price to yield 2.8678 per cent, down from 2.917 per cent late on Thursday. Gains in the dollar pressured the euro. The dollar index rose 0.16 per cent, with the euro down 0.29 per cent to $1.2293. Broader concerns have lingered globally over the last few weeks, including how far and fast US interest rates may rise and what that would mean for global borrowing costs, risk appetite and business confidence.

The spotlight will be on new Fed Chair Jerome Powell next week when he faces questions from both houses of the US Congress in semi-annual testimony starting on Tuesday. His audience will include investors who unceremoniously greeted his early tenure with one of the fastest 10.0 per cent falls in Wall Street stocks in history this month.

In stocks, tech shares climbed 2.17 per cent led by gains in Hewlett Packard Enterprise, which rose 10.5 per cent and HP Inc, up 3.5 per cent. The two companies, created from the split of Hewlett Packard Co in 2015, reported strong results and HPE announced a plan to return $7 billion to shareholders.

The Dow Jones Industrial Average rose 347.51 points, or 1.39 per cent, to 25,309.99, the S&P 500 gained 43.34 points, or 1.60 per cent, to 2,747.3 and the Nasdaq Composite added 127.30 points, or 1.77 per cent, to 7,337.39. MSCI's gauge of stocks across the globe gained 1.14 per cent, with the pan-European FTSEurofirst 300 index rising 0.23 per cent and emerging market stocks up 1.29 per cent.

Gold's spot market price dropped 0.2 per cent to $1,328.97 an ounce. It shed about 1.4 per cent this week, its biggest weekly decline since early December. “We remain somewhat cautious on gold over the short term given that we think the dollar rally is still not over, especially in the light of US. Treasury yields remaining elevated,” said INTL FCStone analyst Edward Meir.

Oil prices rose to their highest in more than two weeks, supported by the shutdown of the El Feel oilfield in Libya and upbeat comments from Saudi Arabia that an OPEC-led effort to cut stockpiles is working. US crude rose 1.26 per cent to $63.56 per barrel and Brent was last at $67.30, up 1.37 per cent.


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