Wall Street empowers world stocks following Fed's move

A measure of stocks across the globe rose in a volatile session on Thursday, led by gains on Wall Street, while the dollar rallied as traders continued to digest the Federal Reserve's uber-dovish stance.

Sterling tumbled, down 0.93 per cent versus the U.S. dollar, as concern grew alongside the probability of a no-deal Brexit that would likely slow economic growth. Expected losses in bank shares on the likelihood of lower interest rates were more than offset by gains in the technology sector, lifting Wall Street's benchmark to near its highest in five months.

"The markets believe that with the Fed on hold the economy will start to show improvement," said Carin Pai, executive vice president at Fiduciary Trust Company International, based in New York. The Dow Jones Industrial Average rose 227.49 points, or 0.88 per cent, to 25,973.16, the S&P 500 gained 31.9 points, or 1.13 per cent, to 2,856.13 and the Nasdaq Composite added 111.38 points, or 1.44 per cent, to 7,840.35.

MSCI's gauge of stocks across the globe gained 0.70 per cent. The pan-European STOXX 600 index lost 0.04 per cent and emerging market stocks rose 0.10 per cent.

Brazil's stock benchmark fell sharply after former President Michel Temer, who left office three months ago, was arrested as part of a sweeping anti-corruption investigation known as "Car Wash." The Bovespa fell 1.2 per cent while the Brazilian currency lost 0.58 per cent at 3.7981 per dollar.

YIELDS FALL ON DOVISH FED

With investors rushing to price in the end of the Fed's tightening cycle, benchmark Treasury yields touched their lowest since early 2018 and those on German Bunds - Europe's benchmark - fell to the lowest since October 2016.

The U.S. 10-year note was little changed in price, but the yield spread between the three-month Treasury bill and the 10-year shrank to its narrowest level since August 2007. A narrow spread between the two yields indicates increased market expectations of a recession. "The Fed has doubled down on its dovish tilt," said Matt Freund, head of fixed-income strategies at Calamos Investments. "The global economy is clearly softening and the Fed is looking at liquidity conditions."

Ten-year Bunds were offering buyers virtually nothing at yields of just 0.047 per cent. Benchmark U.S. 10-year notes were little changed in price, yielding 2.5369 per cent, from 2.537 per cent late on Wednesday.

The 30-year bond last rose 8/32 in price to yield 2.9635 per cent, from 2.975 per cent late on Wednesday. With central banks having already cut rates to the bone and tried full-scale money printing, investors are concerned that many are now low on traditional ammunition to fight recessions.

The U.S. dollar recouped most of the ground lost in the previous session on the Fed's statement. Sterling continued to fall as Britain's Prime Minister Theresa May headed into an EU meeting in Brussels with the rising likelihood of a no-deal Brexit. The pound was recently trading at $1.3078, down 0.86 per cent on the day.

The dollar index rose 0.76 per cent, with the euro down 0.5 per cent to $1.1354. Norway's currency shot up after its central bank, going against the grain, raised interest rates and signalled a 50-50 chance another hike will follow by mid-year.

The Norwegian krone gained 0.38 per cent versus the U.S. dollar at 8.47. Oil prices edged lower, but held near 2019 highs, supported by a tightening of global stocks, OPEC production cuts and U.S. sanctions on key producers Iran and Venezuela.

U.S. crude fell 0.56 per cent to $59.89 per barrel and Brent was last at $67.75, down 1.09 per cent on the day. Spot gold dropped 0.3 per cent to $1,308.83 an ounce. Copper lost 0.34 percent to $6,435.00 a tonne.