Dollar, global shares gain on expected delay to Fed tapering

The dollar gained and global equity markets traded at five-year highs on Monday, lifted by a healthy outlook for stocks as markets awaited a backlog of US economic data that could yield clues on when the Federal Reserve begins to pare its stimulus program.

 

Wall Street opened mostly higher on the realization the US fiscal impasse that was resolved last week by pushing decisions into early next year will likely keep the Fed's bond buying in place well into next year, which would be good for equities.

 

The United States is enjoying moderate growth with tame inflation, a type of Goldilocks economy that is neither too hot nor too cold but has been distorted by the Fed's intervention.

 

"I wouldn't bet against the market in the short term. Investors as a group seem to have decided that the Fed is on board for the foreseeable future," said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts. "It's Goldilocks' evil twin."

 

MSCI's world equity index, which tracks shares in 45 countries, was up as much as 0.7% before flattening, while the FTSEurofirst 300 index of leading European shares rose 0.14% to 1,279.43.

 

Solid corporate earnings from the likes of Philips , whose shares jumped 6.5% after it reported a near tripling of its third-quarter net profit, lifted European shares.

 

The Dow Jones industrial average was down 27.25 points, or 0.18%, at 15,372.40. The Standard & Poor's 500 Index was down 1.86 points, or 0.11%, at 1,742.64. The Nasdaq Composite Index was up 4.53 points, or 0.12%, at 3,918.81.

 

The day's US economic data supported views of modest growth.

 

US home resales fell in September and prices rose at their slowest pace in five months, the latest signs higher mortgage rates were taking some edge off the housing market recovery.

 

The National Association of Realtors said on Monday home sales fell 1.9% to an annual rate of 5.29 million units. August's sales pace was revised down to 5.39 million units from the previously reported 5.48 million units.

 

US Treasuries prices dipped before Tuesday's release of employment data for September, after the partial US government shutdown for more than two weeks delayed economic releases and increased concerns that the closures will weigh on growth.

 

The benchmark 10-year US Treasury note fell 5/32 in price to yield 2.605%.

 

The dollar climbed against the yen and the Swiss franc as a few investors positioned for an expected strong US jobs data reading on Tuesday, which will provide new fodder for the debate over when the Fed will begin to scale back monetary stimulus.

 

Economists polled by Reuters expect jobs growth of around 180,000 and an unemployment rate of 7.3%.

 

"For now all eyes will turn to US nonfarm payrolls data tomorrow, with markets anticipating a print near the 180K level," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York. "If the numbers are close to expectations, the greenback could see a relief rebound as the week proceeds."

 

The dollar rose 0.44% against the yen to 98.13 yen, inching toward a near three-week high of 99.00 yen set last Thursday.

 

The dollar was 0.04% higher against the Swiss franc at 0.9021 francs.

 

The dollar index was up 0.06% at 79.700.

 

US crude slipped below $100 per barrel on pressure from strong supply, but losses were limited by hopes the Fed will delay curbing its money printing program until next year.

 

Stocks of US crude oil gained 4.0 million barrels versus a forecast build of 2.2 million barrels according to the Energy Information Administration.

 

Brent crude futures for December delivery slipped 17 cents to $109.77 a barrel.

 

US crude oil futures for November delivery fell by 92 cents to $99.89 a barrel.