#AceMarketsNews – Sept.25: World equity markets and the dollar advanced on Friday to end a rocky week on an upbeat note after Federal Reserve Chair Janet Yellen said the Fed was on track to raise interest rates this year, and as U.S. economic growth was revised upward again.
Stocks on Wall Street jumped following an almost 3-percent surge in Europe, after a report showed the U.S. economy grew more than previously estimated in the second quarter, propelled by consumer spending and construction – the second upward revision in a row.
Gross domestic product grew at a 3.9 percent annual clip, up from 3.7 percent estimated in August, the Commerce Department said.
Yellen said Thursday that she and other Fed policymakers do not expect recent economic and financial market turmoil to significantly alter the central bank’s policy, easing concerns about the world’s economic health.
There is much to like about the U.S. economy in the second half of the year, despite “all the global malaise,” said Jacob Oubina, senior economist at RBC Capital Markets in New York.
“What the market latched on to with Yellen’s speech on Thursday is that she’s in the 2015 camp for a rate hike. If the domestic economy holds in there, they are going to hike in December,” Oubina said.
The dollar rose 0.30 percent to $1.1195 against the euro and 0.56 percent to 120.73 against the yen. The dollar index rose 0.26 percent.
MSCI’s all-country world index rose 1 percent despite a tepid performance in Asia, where some markets were in the red after data showed Japan slipping back into deflation.
The Dow Jones industrial average rose 187.17 points, or 1.16 percent, to 16,388.49. The S&P 500 added 13.02 points, or 0.67 percent, to 1,945.26 and the Nasdaq Composite gained 7.03 points, or 0.15 percent, to 4,741.50.
European shares rallied after testing 2015 lows in the previous session as concerns eased over how the global economy may be impacted by a slowdown in world No. 2 economy, China. Still, that surge was not enough to prevent a decline on the week.
The pan-European FTSEurofirst 300 index closed up 2.78 percent, while the euro zone’s blue-chip Euro STOXX 50 index finished 3.11 percent higher.
Some investors said they were bullish on the longer-term outlook for European equities, given improving economic data and stimulus measures from the European Central Bank.
“Our six-to-12 month view is that this is another mid-cycle sort of correction that really began last year,” said Mike Wilson, chief investment officer at Morgan Stanley Wealth Management.
The stock market is rebalancing, with manufacturing and the industrial part of the economy very weak, while services and the consumer part is extremely good, globally, he said.
The yield on the U.S. 10-year Treasury note rose 15/32 in price to yield 2.1729 percent, while gold fell from one-month highs after Yellen’s speech and on the strong dollar.
Ten-year German Bund yields rose 6.5 basis points to 0.65 percent, having hit one-month lows on Thursday before Yellen spoke.
Gold futures for December delivery were down 0.74 percent to $1,145.50 an ounce.
Oil markets seesawed on Friday, jumping 2 percent in early trade on lift from a Wall Street rally and then retracing those gains as crude traders waited for direction from weekly U.S. rig count data.
Brent was down 2 cents at $48.15 a barrel in afternoon trading, erasing its earlier gains. U.S. crude was up 61 cents, or 1.4 percent, at $45.52.
(Reporting by Herbert Lash; Editing by Nick Zieminski and Bernadette Baum)
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