Dollar, global equity markets gain as Fed taper seen delayed until next year
(Reuters) – 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 U.S. 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 U.S. 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 .MIWD00000PUS, which tracks shares in 45 countries, was up as much as 0.7 percent before flattening, while the FTSEurofirst 300 index .FTEU3 of leading European shares rose 0.14 percent to 1,279.43.
Solid corporate earnings from the likes of Philips (PHG.AS), whose shares jumped 6.5 percent after it reported a near tripling of its third-quarter net profit, lifted European shares.
The Dow Jones industrial average .DJI was down 27.25 points, or 0.18 percent, at 15,372.40. The Standard & Poor’s 500 Index .SPX was down 1.86 points, or 0.11 percent, at 1,742.64. The Nasdaq Composite Index .IXIC was up 4.53 points, or 0.12 percent, at 3,918.81.
The day’s U.S. economic data supported views of modest growth.
U.S. 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 percent 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.