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Dollar falls, equities gain as Fed calms inflation worries

EconomyMay 25, 2021 05:43PM ET
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2/2 © Reuters. FILE PHOTO: A man stands on an overpass with an electronic board showing Shanghai and Shenzhen stock indexes, at the Lujiazui financial district in Shanghai, China January 6, 2021. REUTERS/Aly Song 2/2

By Chibuike Oguh

NEW YORK (Reuters) -World equity markets made gains while the U.S. dollar hit new lows against major currencies on Tuesday after Federal Reserve officials reaffirmed a dovish monetary policy stance that eased inflation concerns.

Investors weighed the Fed's soothing words that put to rest tapering worries for the time being and helped to drive the dollar to four-and-a-half-month lows. The benchmark 10-year Treasury note also hit two-week lows and was at 1.56% in afternoon trading, down from 1.608% late on Monday.

The yield curve flattened for a fourth straight session, as participants bought the long end of the curve on the view that price pressures would be stable for the rest of the year.

"People are starting to come around to the notion that the Fed is right to be careful about inflation because of the difficulties of COVID around the world," said Jamie Cox, Managing Partner at Harris Financial Group in New York.

MSCI's broadest index of world stocks was up 0.15% at 707.26. The STOXX index of leading European shares gained 0.03% to 445.20 after hitting a record high of 447.15.

On Monday, Fed Board Governor Lael Brainard assuaged inflation concerns, saying she expects that price spikes associated with supply bottlenecks and the reopening of the economy to "subside over time."

James Bullard, president of the St. Louis Federal Reserve, also said on Monday that while still in the pandemic, it was not the time to talk more about changing the parameters of monetary policy.

Those messages were consistent with what Fed Chairman Jerome Powell has said repeatedly over recent weeks.

On Wall Street, all three benchmark indexes closed lower on Tuesday as concerns over the speed and trajectory of the rise in prices persisted among traders.

The Dow Jones Industrial Average fell 0.24%, to 34,312.46, the S&P 500 lost 0.21%, to 4,188.13 and the Nasdaq Composite dropped 0.03%, to 13,657.17.

Some of the most active sectors on Wall Street include technology, industrials, customer discretionary, communication services and real estate.

"The reason why we are having some inflationary pressures is because Asia is having difficulties and that will work itself out and I think price increases like that are not long lasting," Cox said.

Overnight in Asia, the region's main regional equity gauges climbed, with MSCI's broadest index of Asia-Pacific shares outside Japan up 1.5% at a two-week high.

Oil prices edged a shade higher on Tuesday as rising demand from the approach of the Northern Hemisphere's summer driving season and lifting of coronavirus restrictions offset worries that Iran's possible return to the market will cause a supply glut.

Brent futures rose 19 cents, or 0.3%, to settle at $68.65 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 2 cents to settle at $66.07.

Gold prices scaled a more than four-month peak, as the dollar and U.S. Treasury yields slumped after data showed consumer confidence dropped slightly in the United States.

The dollar index, which measures the currency against major rivals, was down 0.2% in the afternoon session, after having fallen as much as 0.3% to 89.533, its lowest since Jan. 7.

Spot gold rose 0.97% to $1,899.2640 per ounce, having earlier hit its highest since Jan. 8 at $1,895.56.

U.S. gold futures gained 0.82% to $1,899.9

Dollar falls, equities gain as Fed calms inflation worries
 

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Comments (10)
Mongo DB
Mongo DB May 25, 2021 1:48PM ET
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This comment section is based
Theta Monkey
Theta Monkey May 25, 2021 10:16AM ET
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You can always count on Bullard to make some market-friendly comments.  By market, I mean the equity market.
Haroon Ellahi Shaikh
Haroon Ellahi Shaikh May 25, 2021 8:12AM ET
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Seems like a trap to rake in the lamb.. Tidal wave of inflation is coming.
Emil Miclea
Emil Miclea May 25, 2021 8:12AM ET
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Cmom very unneducated comment
Dave Jones
Dave Jones May 25, 2021 2:47AM ET
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wotevs
Jouni Matero
Jouni Matero May 25, 2021 2:22AM ET
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Just like that good nightynight sleep and inflation fears gone... Puff! Just like that, problem solved. L O L.
Franco Dominguez
Franco Dominguez May 25, 2021 2:04AM ET
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hyperinflation must talk about
gopi vejendla
gopi vejendla May 25, 2021 1:48AM ET
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Dollar index going deep down,, may this is the indication for ongoing inflation
Sloppy Joe
Sloppy Joe May 25, 2021 1:44AM ET
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recede overnight.....lovely morning joke lol
Larry DeAngelis
Larry DeAngelis May 25, 2021 12:11AM ET
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we know the reopening, employment and growth are "transitory". Not sure about inflation.
Mario tragik
Mario tragik May 24, 2021 10:32PM ET
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inflation fears .. lol okay. I wonder what the next set of fears and hopes is going to be in the future. I have been through inverted yield, trade wars, trade talks going well, virus fears, vaccine hopes, iara iara iara just plain old excuses to pump and dump the markets like pennie stocks.
Cali Cartel
Cali Cartel May 24, 2021 10:32PM ET
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Wait for tomorrow they gonna make market dump with “inflation fears”
noob investor
noob investor May 24, 2021 10:32PM ET
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thats how it works
Ayyan Aftab
Ayyan Aftab May 24, 2021 10:32PM ET
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