Reuters: US Dollar Report: GLOBAL MARKETS-Stocks rally, yen falls on central bank promises

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GLOBAL MARKETS-Stocks rally, yen falls on central bank promises May 28th 2013, 14:46 Tue May 28, 2013 10:46am EDT * Wall Street opens higher * Dollar up 1 pct vs yen after Nikkei rebound * ECB, Bank of Japan reaffirm support * Oil prices surge on stock rally, Middle East tension By Ellen Freilich NEW YORK, May 28 (Reuters) - World stock markets rallied sharply on Tuesday, seizing on clear pledges of monetary policy support from Japanese and European central banks, sending the yen lower and pushing benchmark U.S. bond yields to levels not seen in more than a year. Wall Street jumped in morning trading, with major averages gaining more than 1 percent, as U.S. investors also responded positively to strong figures on consumer confidence and housing prices. Oil prices rose, while gold fell modestly. Heightened expectations the U.S. central bank could soon taper its stimulus program last week had caused turbulence across markets, leaving it to central banks in Japan and Europe to reassure investors their accommodative monetary policies would remain in place. On Monday, when U.S. markets were closed for the Memorial Day holiday, ECB Executive Board member Joerg Asmussen said the policy would stay as long as necessary. On Tuesday, BOJ board member Ryuzo Miyao said it was vital to keep long- and short-term interest rates stable. "Investors want to make sure that everyone is in the same boat, since monetary policy has been the mother's milk of the rally so far this year and there was some concern that policy would be changed or amended," said Paul Nolte, managing director at Dearborn Partners in Chicago. The Dow Jones industrial average was up 170.22 points, or 1.11 percent, at 15,473.32. The Standard & Poor's 500 Index was up 20.02 points, or 1.21 percent, at 1,669.62. The Nasdaq Composite Index was up 46.86 points, or 1.35 percent, at 3,506.00. The rush to stocks weighed on safe-haven U.S. debt, sending prices down and yields up ahead of a $35 billion Treasury auction of two-year notes, the start of $99 billion in new coupon-bearing supply this week. Treasuries yields have jumped since Federal Reserve Chairman Ben Bernanke said on Wednesday that the U.S. central bank may decide to pull back on its bond purchases in the coming few Fed policy meetings if data show the economy is gaining steam. Ten-year notes were last down 27/32 in price to yield 2.11 percent, up from 2.01 percent on Friday. That marks a high not seen since April 6, 2012. In the latest economic data, U.S. consumer confidence jumped far more than expected in May, climbing to 76.2 from a revised 69 in the previous month. U.S. home prices rose 1.1 percent in March, according to the latest S&P/Case Shiller data. "The strength of the stock markets internationally and in the U.S. is putting Treasuries under pressure," said Lou Brien, market strategist at DRW Trading in Chicago. The yen tumbled as comments from central bankers sent investors flocking into riskier, higher-yielding trades funded by cheap borrowing in the Japanese currency. Japan's Nikkei stock average rose 1.2 percent while European and U.S. shares climbed, reversing last week's losses. The euro rose 1.1 percent to 131.83 yen, pulling away from Thursday's trough of 129.94 yen, according to Reuters data. Against the dollar, the euro dipped 0.1 percent to $1.2912, paring losses after an Italian bond auction saw its debt costs slip to their lowest level since the euro came into existence in 1999. The safe-haven Swiss franc fell, with the dollar up 0.6 percent at 0.9691 franc and the euro up 0.5 percent at 1.2516 francs. Currencies such as the yen and the Swiss franc, which rose sharply last week after a recent sell-off in stock markets, typically gain in times of financial uncertainty. The dollar index was up 0.1 percent, while European stocks traded near recent multi-year highs. Gold slipped around one percent as investors in bullion-backed funds (ETFs) were discouraged by a rising dollar and firmer stock markets. Dealers noted U.S. 10-year treasury yields above 2 percent and tame inflation expectations as negative factors for the market as bullion has no interest rate. Spot gold fell 1.1 percent to $1,378.89 an ounce by 1200 GMT. It is down around 18 percent for the year. U.S. gold fell 0.6 percent to $1,377.90 an ounce. Silver was down 1.4 percent to $22.31 an ounce and palladium dropped 1.1 percent to $727.72 an ounce. Platinum was flat at $1,447.49 an ounce. Brent crude oil rose more than $2 per barrel on rising Middle East risk and as stocks rallied. Buoyant investor sentiment outweighed worries over ample oil supplies and concern over fuel demand as global economic growth remained tepid. Brent crude oil for July rose $2.00 to $104.62 per barrel while U.S. crude rose $1.60 to $95.75 per barrel. Equity markets around the world hit their highest levels in many years this month due to the cheap funding from the Fed and other central banks. But comments by Fed chairman Ben Bernanke suggesting a U.S. recovery could bring a shift in policy have made investors question prospects for further gains. The question is being asked most about the Japanese market, where the Nikkei stock index had reached a 5-1/2-year high before dropping 7.3 percent last Thursday - its largest one-day loss since the March 2011 earthquake and tsunami. The Nikkei steadied on Tuesday, ending 1.2 percent higher after long-serving board member Ryuzo Miyao said the Bank of Japan would fine-tune market operations to ensure its unprecedented easing campaign is not derailed. In Europe, the broad FTSE Eurofirst 300 index was up 1.25 percent by midday, its best day in a month. MSCI's world equity index had risen 0.4 percent by mid-morning, reversing four days of losses. Link this Share this Digg this Email Reprints

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