Yellen spurs global stock rally as oil rebounds, dollar tumbles

BLOOMBERG

Stocks jumped around the world after Federal Reserve Chair Janet Yellen reasserted the central bank’s gradual approach to raising interest rates. Commodities climbed as the dollar extended its worst month in more than five years.
Yellen’s signal that weakening world growth calls for a slow approach to tightening policy ignited gains for shares from Shanghai to Frankfurt after U.S. equities erased their losses for the year. Diminishing prospects for a first-half Fed rate increase sent the Bloomberg Dollar Spot Index toward the lowest since June and drove emerging-market currencies toward their best month since 1998. Credit markets rallied and U.S. oil gained for the first time in five days.
Futures show traders now see no chance of Yellen changing policy next month and only a 54 percent likelihood of an increase by November after she dialed back some of the commentary made by other officials the past two weeks. The Fed chair emphasized during her appearance at the Economic Club of New York that the central bank remains wary of raising rates amid threats to American growth from a slowing global economy.
“We have seen European markets broadly head higher on Yellen’s dovish note last night,” said Michael Hewson, the London-based market analyst at CMC Markets Plc. “It’s the only factor driving them up today.”
The MSCI All-Country World Index added 0.9 percent as of 8:15 a.m. New York time, leaving it close to wiping out all its losses for the year to date. Standard & Poor’s 500 Index futures advanced 0.5 percent, indicating equities will extend Tuesday’s 2016 high. The Shanghai Composite Index gained 2.8 percent and Germany’s DAX Index added 1.7 percent. The Bloomberg Dollar Spot Index fell 0.3 percent.

Stocks
The Stoxx Europe 600 Index climbed 1.7 percent, headed for a 2.5 percent advance for March. Commodity-related shares posted the biggest gain of the 19 industry groups on the equity benchmark, with Anglo American Plc and Rio Tinto Group rising more than 6 percent. Energy companies rebounded as oil recovered.
Metro AG jumped 12 percent after the German retailer said it’s preparing to split in two in a move aimed at boosting its value.
Data from the ADP Research Institute showed an increase of 200,000 U.S. jobs for March, compared with a median estimate of 195,000 by economists in a Bloomberg survey. The private report is watched as an indicator of the non-farm payroll release due Friday.

Currencies
Bloomberg’s dollar index, which tracks the greenback against 10 major peers, has lost 3.7 percent in March, set for a second straight monthly drop and the biggest decline since September 2010.
The U.S. currency slipped 0.2 percent to $1.1317 per euro and weakened 0.3 percent to 112.33 yen as it dropped against all of its major counterparts.
The Fed would act “cautiously” as it looks to raise rates against a backdrop of deteriorating global growth, Yellen said. Policy makers including St. Louis Fed President James Bullard and San Francisco Fed boss John Williams said last week that higher borrowing costs were possible as soon as next month.
“Yellen has taken back a degree of control after other policy makers had warned that rates could rise in April,” said Kully Samra, who manages U.K. clients for Charles Schwab Corp. in London. “Slow hikes are key for markets at the moment.”

Emerging Markets
A gauge of 20 developing-nation currencies climbed 0.5 percent, rising for a fourth day and taking this month’s advance to 5.4 percent, the biggest gain since a 5.5 percent rally in February 1998.
Malaysia’s ringgit and South African rand topped the moves on Wednesday as they strengthened 1.6 percent and 1.3 percent, respectively. Russia’s ruble gained 0.7 percent and is 11 percent higher in March, the best performance among emerging markets. Brazil’s real is the second-best performer this month, up 10 percent. South Africa’s rand strengthened beyond 15 against the dollar for the first time since Dec. 21.
The MSCI Emerging Markets Index of shares rose 2.2 percent, the most in two weeks. The gauge is up 12 percent in March, heading for its biggest monthly increase since October 2011.
The Shanghai Composite Index gained the most on Wednesday since March 2, as companies including Bank of Communications Co. and China Petroleum & Chemical Corp. reported better-than-expected earnings. The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong added 2.9 percent.

Bonds
Odds of a U.S. rate increase next month slipped to zero Tuesday, from 10 percent a week ago, while the probability of an increase at the Fed’s June meeting declined to 28 percent, from 46 percent a week earlier, according to futures trading tracked by Bloomberg.
Australian government debt led a charge higher in Asia, with 10-year yields sliding eight basis points, or 0.08 percentage point, to 2.50 percent. Rates on similar maturity Indian bonds dropped two basis points to 7.49 percent.
German 10-year bonds were little changed after a run of gains that pushed the yield to the lowest since March 1, as a report showed that inflation in Europe’s largest economy exceeded analyst estimates in March.
Bund yields were at 0.15 percent, after earlier sliding to 0.12 percent. Germany’s European Union-harmonized rate of annual inflation was at 0.1 percent, compared with a 0.2 percent drop in February. Economists in a Bloomberg survey predicted that prices would be stagnant.
Italy’s 10-year bond yields fell one basis point to 1.23 percent.
Yields on 10-year Treasuries increased three basis points to 1.84 percent after they fell eight basis points last session. A bond-market gauge of inflation expectations rose a second day as investors bet on a faster pace of price increases.
The cost of insuring high-yield debt in Europe fell for the first time in seven days, with the Markit iTraxx Crossover Index of credit-default swaps on 75 companies down seven basis points to 314 basis points.
European non-financial companies are inching ever closer to borrowing for free after Sanofi, France’s biggest drugmaker, sold bonds in euros with the lowest yield on record on Tuesday.
In Japan, investors didn’t buy or sell the on-the-run 30-year government debt on Japan Bond Trading Co. for the first time since Sept. 28. The Bank of Japan introduced negative rates on certain excess deposits on Jan. 29.

Commodities
West Texas Intermediate crude snapped a four-day, 7.7 percent tumble to rise 1.8 percent Wednesday, to $38.97 a barrel. Brent crude gained 1.5 percent to $39.72. The weaker dollar makes crude and other commodities cheaper in other currencies.
Nickel for three-month delivery advanced 0.5 percent to $8,490 a metric ton on the London Metal Exchange. Gold declined 0.5 percent to $1,235.69 an ounce in the spot market following a 1.7 percent jump last session.