Dollar drops, global stocks climb as Fed seen extending its stimulus well into 2014
(Reuters) – Expectations the Federal Reserve will keep its stimulus in place for longer because of the U.S. fiscal stand-off’s impact on the economy on Friday pushed a measure of global equity markets to a fresh five-year high and the dollar to an eight-month low.
Better-than-expected results from Google Inc (GOOG.O) and Morgan Stanley (MS.N) also lifted stocks on Wall Street, with shares of the Internet search company rising 13 percent at one point to breach the $1,000 mark for the first time.
An acceleration in China’s giant economy provided a further boost for stock markets, as well as for commodities such as oil and copper, as the prospect of an extended spell of super-easy money and improving growth buoyed investors.
MSCI’s index tracking the performance of 45 countries .MIWD0000PUS rose 0.57 percent to highs last seen in May 2008, while a European index, the Stoxx Europe 600 .STOXX gained for a seventh successive day, its longest winning streak this year.
A last-minute deal by U.S. lawmakers this week to avert a debt default and re-open shuttered government offices also has bolstered investor confidence, pushing the broad S&P 500 to a record close on Thursday.
On the company earnings front, so far 85 companies representing 25.8 percent of S&P 500’s market capitalization have reported third-quarter results, with earnings beating estimates by an average of 4.2 percent.
Google was up 12.4 percent at $999.26, while Morgan Stanley rose 2.5 percent to $29.64.
“Surprises have been broad-based with all of the 9 sectors surpassing their forecasts,” said Jonathan Golub, chief U.S. market strategist at RBC Capital Markets in New York.
The Dow Jones industrial average .DJI was down 11.56 points, or 0.08 percent, at 15,360.09. The Standard & Poor’s 500 Index .SPX was up 5.78 points, or 0.33 percent, at 1,738.93. The Nasdaq Composite Index .IXIC was up 31.82 points, or 0.82 percent, at 3,894.97.
Traders were continuing to sell it against a broad basket of currencies from advanced and emerging economies, leaving the dollar index .DXY at 79.580 on expectations the Fed may delay scaling back its monetary stimulus.
Analysts said concerns about the negative impact on the U.S. economy and the likelihood the Fed would leave its bond-buying program intact until well into next year would weigh on the dollar, leaving the euro the potential to rise towards $1.40.