Get breaking news alerts via email

Click here to manage your alerts
US stimulus hopes shore up markets
The Fed » FTSE, Dow rise as hopes grows for continued bond purchases.
First Published Jun 17 2013 11:01 am • Last Updated Jun 17 2013 11:01 am

LONDON • Growing expectations that the U.S. Federal Reserve will maintain its current policy stance gave stocks a boost Monday.

Concern that the Fed would start reducing the amount of financial assets it is buying has been the main factor behind the volatility that has gripped markets over the past few weeks.

Join the Discussion
Post a Comment

Investors were spooked in late May when Fed chairman Ben Bernanke said the U.S. central bank might pull back on its aggressive support for the U.S. economy if indicators, especially hiring, improve.

Policymakers at the Fed, who will start a two-day meeting Tuesday to discuss the central bank’s next steps, will be greeted by a run of fairly disappointing economic data and investors now think they will persevere with the current policy.

The Fed buys $85 billion in bonds every month as part of a campaign to keep interest rates extremely low. The aim is to encourage borrowing, spending and investing. Some investors worry that long-term interest rates could spike when the Fed pulls back, raising borrowing costs and threatening the economic recovery. Higher yields for government bonds have already started pushing mortgage rates up.

"We think it is too early for the Fed to change its monetary stance at this week’s policy meeting," said Neil MacKinnon, global macro strategist at VTB Capital. "However, the markets will be expecting some clarification of the Fed’s intentions in the light of recent market volatility."

In Europe, the FTSE 100 index of leading British shares was up 0.9 percent at 6,362 while Germany’s DAX rose 1.5 percent to 8,252. The CAC-40 in France was 1.9 percent higher at 3,876.

In the U.S., the Dow Jones industrial average was up 1.1 percent at 15,232 while the broader S&P 500 index rose 1 percent to 1,644.

An unexpected improvement in a manufacturing survey around the New York region and news that most U.S. homebuilders are optimistic about home sales for the first time in seven years had little market impact. The surveys from the Empire State and The National Association of Home Builders are both considered by investors to be of secondary importance.

The meeting of leaders from the Group of Eight top industrial countries in Northern Ireland was on the radar but is not expected to yield much of interest to investors as the commentary in the run-up to the summit has been largely dominated by disagreements between Russia and the rest over war-riven Syria.

story continues below
story continues below

"With Britain chairing the discussions we can probably expect tax compliance and greater transparency at the forefront of the agenda, and little real impact on financial markets anticipated in the near term," said Brenda Kelly, senior market strategist at IG.

Earlier in Asia, Tokyo’s Nikkei 225, the regional heavyweight, jumped 2.7 percent to close at 13,033.12, extending Friday’s 2.4 percent gain. Hong Kong’s Hang Seng added 1.2 percent to 21,225.90 while South Korea’s Kospi shed 0.3 percent to 1,883.10. Mainland Chinese stocks were mixed.

One reason why Japanese shares did so well was renewed weakness in the yen following a recent rally — a lower yen makes the country’s exports more competitive. The dollar was up 1.4 percent at 94.92 yen while the euro was steady at $1.3342.

Oil prices were up alongside equities, with the benchmark New York rate up 29 cents at $98.14 a barrel.

Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment

About Reader Comments

Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.