US Quantitative Easing

Trading mixed as market absorbs era-defining IPOs

Hopes that US interest rates will remain at ultra-low levels for the foreseeable future are lending support to selective riskier assets, though trading is mixed as the market absorbs two trend-defining flotations and some lacklustre US data, the FT reports. The FTSE All-World equity index is up 0.4 per cent, seeing gains as the dollar softens after volatile trading. The greenback’s trade-weighted index is down 0.5 per cent at 75.10. The intermittently firmer buck – and a weak Philly Fed activity survey for May – are curtailing demand for some commodities following the previous session’s strong rally, with copper down 1.5 per cent to $4.04 a pound and oil lower by 1.7 per cent to $98.45 a barrel. Gold is off 0.3 per cent to $1,493 an ounce. Investors on Thursday appear thankful that the US Federal Reserve, while discussing its “exit strategy” showed no hurry to tighten monetary policy significantly once its $600bn quantitative easing programme ends next month. There is also little chance of the world’s third-biggest economy raising rates any time soon after Japan fell back into recession in the first quarter following the March 11 earthquake, tsunami and nuclear accident. Traders seem content for now to accept that while such monetary largesse signals continuing fundamental economic weakness in the US and Japan, it will allow globally focused corporations to remain healthy – providing growth in core Europe and developing nations can pick up the slack.

Hopes continue to brighten for economy

Investors continued to bet on a US economy that is picking up steam, bidding up US stocks and selling US Treasury bonds, reports the FT’s global market overview. Global stocks were generally higher following the drop in the US unemployment rate to 9 per cent in January reported on Friday. The FTSE All-World equity index rose 0.6 per cent, to a fresh cyclical peak. The S&P 500 in New York was up 0.8 per cent at 1,320, its best level since June 2008. The resource-heavy FTSE 100 in London rose 0.9 per cent and the broad FTSE Eurofirst 300 was also up 0.9 per cent. Tresaury yields also hit their highest since April, pushed along after Richard Fisher, head of the Dallas branch of the Federal Reserve, said he “would formally dissent as a voter” if the Fed were to propose further easing. he dollar is firmer as a tug of war plays out between those still trading the buck’s inverse risk-on relationship and those noting the greenback’s improving yield attraction. The dollar index was up 0.2 per cent at 78.20 and the euro was down 0.1 per cent to $1.3571, having given up an initial advance following the German industrial data. Copper saw a new record high, then tumbled back to Friday’s close in late London trading. The London-traded contract was flat at $10,050 a tonne, having earlier hit a record of $10,160 as traders reckon supply will be outstripped by improved demand as the global economy recovers.

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