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Equities, dollar rise as Fed officials downplay inflation concerns

EconomyMay 26, 2021 05:01PM ET
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2/2 © Reuters. FILE PHOTO: A man walks past a stock quotation board at a brokerage in Tokyo, Japan February 26, 2021. REUTERS/Kim Kyung-Hoon 2/2

By Chibuike Oguh

NEW YORK (Reuters) -Global equity markets gained and the U.S. dollar rallied against major currencies on Wednesday for the first time this week as Federal Reserve officials continued to downplay prospects of rising inflation.

Fed vice chair for supervision Randal Quarles signaled the U.S. central bank's plans to open talks on easing its bond buying program as the economy roars ahead and prices rise. On Tuesday, vice chair Richard Clarida said the Fed could curb inflation and engineer a "soft landing" without throwing the economic recovery off track.

On Monday, Fed Board Governor Lael Brainard and James Bullard, president of the St. Louis Fed, reiterated the dovish monetary policy stance.

The dollar index was up 0.392%, while the benchmark yields on 10-year U.S. Treasuries slipped to 1.557%, from 1.564% late on Tuesday.

"The Fed has really been pushing its view on inflation, but with regards to bond tapering investors are concerned they will allow the economy run hot," said Charlie Ripley, senior investment strategist for Allianz (DE:ALVG) Investment Management.

MSCI's broadest index of world stocks rose 0.18% to 708.52. European stocks were flat below a record peak set on Tuesday.

The comments from multiple Fed officials reflect a shifting tone at the central bank. A month ago, Fed Chair Jerome Powell said it was "not yet" time to contemplate discussion of policy tapering or slowing the pace of asset purchases. More recently policymakers have acknowledged they are closer to debating when to scale back crisis support for the U.S. economy.

On Wall Street, all three main indexes closed higher driven by consumer discretionary, communication services and financial sectors.

The Dow Jones Industrial Average rose 0.03%, to 34,323.05, the S&P 500 gained 0.19%, to 4,195.99 and the Nasdaq Composite added 0.59%, to 13,738.00.

"The Fed is still putting a lot of liquidity into the system and when the economy is running hot that's got a lot of people thinking that they might make a policy mistake," Ripley said.

Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.45% to over two-week highs, while Tokyo's Nikkei advanced 0.3%.

Emerging markets stocks strengthened as stronger economic growth numbers in Mexico lifted the peso, boosting hopes the country is on track to recover from its sharpest economic contraction since the 1930s.

MSCI's index of emerging market stocks rose 0.48%.

Gold prices fell below $1,900 per ounce, its appeal dimmed by a rebounding dollar and U.S. Treasury yields.

Spot gold shed 0.17% to $1,896.06 per ounce after hitting its highest since Jan. 8 at $1,912.50.

Oil prices settled higher as a drop in U.S. crude stockpiles reinforced expectations of improving demand ahead of the peak summer driving season, offsetting worries that a possible return of Iranian supply would cause a glut.

Brent settled up 16 cents, or 0.3%, to $68.87 a barrel and U.S. West Texas Intermediate (WTI) crude settled up 14 cents, or 0.2%, at $66.21 a barrel.

Equities, dollar rise as Fed officials downplay inflation concerns
 

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Comments (6)
Julio AXA
Julio AXA May 26, 2021 8:48PM ET
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rate cannot compare to jobless fed, you are bad, rate using to compare inflation, gdp, ppi, debt, consumer price. powell and yellen is a bad, he make a bubble us market and dolar to junk currency in the world. so up rate if you wanna this save
Farting Joe
Farting Joe May 26, 2021 2:21AM ET
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Hehe Fed can only say thie as they created the greatest Ponzi, banksters
Tyler Lee
Tyler Lee May 26, 2021 2:21AM ET
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Your name and thumbnail is the best. hahaha
Mark Stallone
Mark Stallone May 26, 2021 2:10AM ET
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So what are the markets going to do when they learn Fauci and company intentionally withheld the vaccine release date 3 weeks longer.. until after the election?
Notvery Goodathis
Peteymcletey May 26, 2021 2:10AM ET
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link?
Tyler Lee
Tyler Lee May 26, 2021 2:10AM ET
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why do brainlets ask for the "link"? Is that how lazy you are that you have to have someone else do the DD for you?
TL Chan
TL Chan May 26, 2021 2:00AM ET
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Fed is successful in making you guys believing in low inflation or the inflation is out of the MMT or QE equation. That is the danger where the Fed is leading the public. If you folks, not being able to grasp on what the economy is ctually going through, and the path forward, then you have to bear the consequences yourself, it is too late to give a macro economics lesson when people care such short term view and have patience for digesting or even listening to or remembering the interaction and dynamics of the different important variables in play now and down the path.
Michael Angelo
Michael Angelo May 26, 2021 1:30AM ET
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So... if inflation remains low, as all fed members affirmed, the printing and printing will continue forever? In case unemployment and growth doesn't reach whatever value they guesstimate, they will continue? Any clue what they want to do? Where's the end? Pat*het*ic.
Atlantic Coast Money
Atlantic Coast Money May 26, 2021 1:30AM ET
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They are just puppets. And I will tell you what...the market aint buying it. Notice it has been sideways or down since 5/7. As inflation numbers remain elevated with each new measurement, market will continue to lose faith in the Fed. Bull traps have been the norm. Fortunately most retail are not falling for it. If retail aint buying, the institutions will stop buying. Another problem is that retail is shorting so the institutions and market makers are just chasing the liquidity and squeezing out all they can before this monster drops.
TL Chan
TL Chan May 25, 2021 11:00PM ET
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What a non professional report. Asian up because US investors throw money out from US assets to Asia market.
Jeremy Thornton
Jeremy Thornton May 25, 2021 11:00PM ET
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In the US... everything revolves around the US. Don't you know who we think we are?!!! Lol
 
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