US stocks, bonds jump on go-slow Fed; oil climbs

Bloomberg

US stocks rose with Treasuries, while the dollar retreated after Janet Yellen signaled the Federal Reserve won’t rush to tighten monetary policy as inflation remains persistently below target.
The S&P 500 Index climbed within 1 percent of an all-time high, joining a rally in European equities as Yellen expressed confidence in the American economy while suggesting inflation rates won’t force the Fed’s hand. The dollar fell versus major peers, while 10-year Treasury yields slid below 2.32 percent and gold futures rose. Oil bounced above $45 a barrel on reports of a decline in stockpiles.
The statement from Yellen diverted attention from the release of emails by Donald Trump Jr. about his controversial meeting with a Russian lawyer, though concern remains that the latest saga in Washington may be an unwelcome distraction for the Fed seeking to dismantle a decade of monetary stimulus. The scandal could delay fiscal stimulus initiatives in the US, keeping companies hesitant to deploy spending plans, commentators at Pacific Investment Management Co. to UBS Group AG warn.
“At the margin this does muddy the waters,” Bhanu Baweja a cross-asset strategist at UBS, said in an interview with Bloomberg TV. “There is greater political uncertainty. All of a sudden that capex rebound that all of us have been waiting for such a long time, might get postponed even further. It matters for the economy and therefore it matters for what the Fed is thinking medium term.”
The tightening cycle by many of the developed world’s central banks is expected to gain further momentum on Wednesday from the Bank of Canada, which is expected to hike interest rates.
Yellen gives testimony Wednesday and Thursday, with investors looking for guidance on when the Fed could start reducing its balance sheet. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. report results this week. The UK is due to publish its Repeal Bill on EU membership this week.
The S&P 500 Index advanced 0.5 percent as of 9:31 a.m. in New York. The Stoxx Europe 600 Index added 1.3 percent, led by builders and energy companies. The FTSE 100 rose 1.1 percent.
The Bloomberg Dollar Spot Index fell 0.2 percent. The pound strengthened 0.3 percent to $1.2885 after UK payrolls data beat estimates and unemployment fell to a 42-year low, erasing an earlier loss. The yen gained 0.7 percent to 113.12 per dollar. The euro was little changed at $1.1466.
The 10-year US Treasury yield dropped six basis points to 2.31 percent. German benchmark bund yields fell four basis points to 0.58 percent. WTI crude climbed 1.8 percent to $45.87 a barrel.
Gold added 0.5 percent to $1,224.29 an ounce.