By Herbert Lash
NEW YORK (Reuters) – A gauge of world equity markets climbed while the dollar and gold prices eased on Thursday after the Federal Reserve said it would roll out an aggressive new strategy that aims to boost employment and allow inflation to run faster than in the past.
Yields also rose on longer-dated government bonds as Fed Chair Jerome Powell laid out a policy that will seek to achieve inflation averaging 2% over time and offset below -2% periods with higher inflation “for some time.”
The Fed also aims to ensure employment doesn’t fall short of its maximum level, a new approach Powell said reflected an appreciation “that a robust job market can be sustained without causing an unwelcome increase in inflation.”
The dollar index <=USD> rose 0.27%, spot gold prices <XAU=> fell 0.6% to $1,941.67 an ounce and advancing shares outnumbered declining stocks on Wall Street.
“The dollar is going to be the punching bag again,” said Ed Moya, senior market analyst at OANDA in New York. Powell’s remarks “confirmed the market’s expectations that this extreme level of accommodation is not going away any time soon, and risky assets are liking that.”
MSCI’s benchmark for global equity markets <.MIWD00000PUS> rose 0.19% to 585.13, while Europe’s broad FTSEurofirst 300 index <.FTEU3> dropped 0.04% to 1,445.92.
On Wall Street, the Dow Jones Industrial Average <.DJI> rose 0.9%, the S&P 500 <.SPX> gained 0.47% and the Nasdaq Composite <.IXIC> added 0.17%.
“The market will probably take some time to digest the implications,” said Nancy Davis, chief investment officer at Quadratic Capital Management LLC in Greenwich, Connecticut.
“But I believe that a higher willingness to let inflation run above 2% should hurt long-end bonds and inflation expectations probably should increase,” she said.
The 10-year U.S. Treasury <US10YT=RR> note rose 2.3 basis points to 0.7096%.
The euro <EUR=> was last down 0.28% at $1.1796.
Brent crude futures <LCOc1> fell $0.59 to $45.05 a barrel. U.S. crude futures <CLc1> slid $0.50 to $42.89 a barrel.
Graphic: 2020 asset performance http://fingfx.thomsonreuters.com/gfx/rngs/COMMODITIES-ASSETS/010031B62XZ/index.html#section/assets
Graphic: World FX rates in 2020 http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html
(Reporting by Herbert Lash; Editing by Bernadette Baum)
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