By Chibuike Oguh
NEW YORK (Reuters) – Global equity markets rose while the U.S. dollar dipped on Monday as investor concerns that the Federal Reserve would soon begin changing its accommodative monetary stance faded.
Market sentiment was also buoyed after the U.S. Food and Drug Administration granted full approval to the Pfizer Inc/BioNTech SE COVID-19 vaccine, making it the first to secure such official validation. New cases, driven by the highly infectious Delta variant, have surged in parts of the United States with lower vaccination levels. [L4N2PU36O]
The dollar index slid on Monday after hitting a nine-month high last week, as investors firmed up bets the Fed will start scaling back pandemic-era stimulus policies ahead of Europe and Japan.
But Robert Kaplan, the hawkish president of the Dallas Fed, dented those expectations on Friday when he said he might reconsider the need for an early start to tapering if the virus harms the economy.
His comments also doused anticipation that Fed Chair Jerome Powell’s speech at Jackson Hole this week would indicate a timeline for when the central bank would begin ending its bond-buying program.
The dollar index, which measures the currency’s performance against a basket of six major currencies, fell 0.457% to 93.064 in early afternoon trading.
“There was a fear that they were going to announce tapering in Jackson Hole and start in September. But it now looks that will be in 2022,” said Thomas Hayes, managing member at Great Hill Capital.
The MSCI world equity index, which tracks shares in 50 countries, was up 1.18%, recovering after having its biggest weekly fall since June last week. Europe’s STOXX 600 closed higher at 0.66%.
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The U.S. FDA, which had given the two-dose Pfizer/BioNTech vaccine emergency-use authorization in December, went a step further based on updated data from the company’s clinical trial and fully approved it for use in people age 16 and older.
Shortly after the announcement, the Pentagon said it is preparing to make the vaccine mandatory for U.S. military personnel. U.S. health officials expect that the FDA’s full approval also will prompt more state and local governments, as well as private employers, to impose vaccine mandates.
All major indexes were making gains on Wall Street in the early afternoon, led by technology, communications, industrials and financials.
The Dow Jones Industrial Average rose 0.75%, to 35,384.79, the S&P 500 gained 0.99%, to 4,485.75 and the Nasdaq Composite added or 1.52%, to 14,938.17.
Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.46% higher, while Japan’s Nikkei rose 1.78%.
“It’s a whole combination of factors, the big one being the FDA approval of the vaccine. A lot of people are taking it as good news and then the Fed may not be as keen on tapering as suspected,” said Michael Ashley Schulman, chief investment officer at Running Point Capital.
Oil prices rose more than 5% on Monday as the weaker dollar and strong global equities markets boosted crude futures after seven days of declines.
Brent crude climbed $3.64, or 5.6%, to $68.82 a barrel after touching its lowest since May 21 at $64.60 during the session. U.S. West Texas Intermediate (WTI) crude for October delivery rose $3.61, or 5.8%, to $65.75.
Both benchmarks had marked their biggest week of losses in more than nine months last week, with Brent sliding about 8% and WTI about 9%.
Safe-haven gold vaulted over the key $1,800 psychological level on Monday as a retreat in the dollar pushed investors to seek refuge in bullion even as expectations on Fed tapering eased.
Spot gold was up 1% at $1,802.7600 per ounce, after hitting its highest since Aug. 5.
(Reporting by Chibuike Oguh in New York; Editing by Dan Grebler)
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