Stocks up, dollar, bond yields down on Fed rate cut signal

Stocks up, dollar, bond yields down on Fed rate cut signal

Reuters  | Jun 20, 2019 05:00

Stocks up, dollar, bond yields down on Fed rate cut signal

* MSCI world index up 0.4% on Fed rate cut signal

* European shares gain 0.6%

* Oil jumps 3% after Iran shoots down U.S. drone

* Dollar falls to six-month lows against the yen

* Norges Bank raises rates

* Graphic: World FX rates in 2019

By Tom Wilson

LONDON, June 20 (Reuters) - World stock markets rose on Thursday after the U.S. Federal Reserve signalled it was likely to cut interest rates next month, and the dollar and benchmark bond yields fell to multi-year lows.

The Fed on Wednesday suggested rate cuts might start as soon as next month, saying it was ready to take action in the face of growing economic risks MSCI world equity index .MIWD00000PUS , which tracks shares in 47 countries, gained 0.4% on the prospects of further stimulus, heading for a third day of gains. The Euro STOXX 600 .STOXX rose 0.66% in early trading and Wall Street futures indicated U.S. stocks were set to open higher.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.2%, led by gains in China.

The dollar fell and benchmark U.S. and euro zone government bonds fell after the Fed's move. The dollar was on course for its biggest two-day drop against a basket of other currencies .DXY in 14 months and dropped 0.5% to a half-year low against the Japanese yen. JPY=EBS

The Fed's rate signal came before meetings at major central banks in Asia and Europe that were expected to flag similar moves. The European Central Bank and the Australian central bank had earlier signalled this week more policy stimulus was needed.

"It becomes a race to the bottom for global rates markets, a race to the bottom for FX," said Peter Chatwell, head of rates at Mizuho.

The Bank of Japan left rates unchanged on Thursday but stressed that global risks were rising, suggesting it was leaning towards boosting monetary support. Norway's central bank raised rates, as expected, sending the Norwegian crown up 1.6% against the dollar NOK=D3 and 1% against the euro. EURNOK=

The Bank of England was due to announce its policy decision at 1100 GMT. It looked set to stick to its message that it was likely to raise rates. oil prices jumped 3% after Iran shot down a U.S. drone that its Revolutionary Guards said was flying over southern Iran, raising fears that a military confrontation could erupt between Tehran and Washington. TALKS Geopolitical risks elsewhere persisted, although hopes grew for progress in U.S.-China trade talks. The world's two biggest economies have imposed increasingly severe tariffs on each other's imports.

Chinese and U.S. officials will hold trade talks following instructions from their leaders, the Chinese commerce ministry said on Thursday, adding that Beijing hoped Washington would create the necessary conditions for dialogue. Barraud, chief economist at Market Securities in Paris, said stock markets had so far mostly dodged fallout from the trade war. He warned they could suffer if economic indicators worsen in the second half of the year.

"Equities are mainly benefiting from the easy money policy, without too much damage on the economic front," he said. "That may change in H2 ... metrics will likely weaken through the world because of the impact of ongoing tariffs." BOND YIELDS DROP The Fed's dovish tone caused the 10-year U.S. Treasury's yield US10YT=RR to fall as low as 1.974%, its lowest since November 2016. It reached 2.8% in January.

Government bonds elsewhere also fell, some to near record lows. Germany's 10-year government bond yield, a benchmark for sovereign debt in the euro zone, was down 3 basis points at -0.316%, testing this week's record low of -0.327%. DE10YT=RR

Japanese 10-year bond yields 10YTN=JBTC fell to a three-year low of minus 0.160%, a drop of 2 basis points. The comparable Australian yield AU10YT=RR fell to a record low below 1.30%.

Brent crude futures LCOc1 were up $1.39, or 2.25%, at $63.28 a barrel around 0815 GMT on the tensions in the Middle East and signs of improving demand in the United States.

For Reuters Live Markets blog on European and UK stock markets, please click on: LIVE/

Related News

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (UK) English (India) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes


Download the App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors. is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.