World shares rise as investors put faith in Fed’s message

Thursday, 30 October 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: World stocks rose on Wednesday, lifted by strong corporate earnings and investor optimism that the US Federal Reserve won’t raise interest rates for some time, even as it is expected to officially wind down its bond-buying stimulus program. Europe’s main indices followed the overnight lead from Wall Street and Asia, although the third-quarter earnings reports out of Europe weren’t quite as solid as those from the United States.

Traders sit at their desks at IG Index in London The dollar was under light selling pressure and major government bond yields were marginally lower, as currency and fixed income markets anticipated a soothing message from the Fed when it ends its two-day policy meeting later in the day. Germany’s DAX was up almost 1% in early trade, Britain’s FTSE was up half a%, and France’s CAC 40 up a third of one%. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.1% and Japan’s Nikkei share average climbed 1.5%. “Markets are banking on the prospect that the Federal Reserve will do everything in its power to anchor interest rate expectations at, or below, current levels,” said Michael Hewson, chief strategist at CMC Markets in London. “Any attempt to alter the (policy statement’s) language in anything other than a dovish fashion could well see markets take fright,” he said. The Fed is widely expected to announce it will end its two-year-old stimulus program known as quantitative easing three, as the US economy continues to gather momentum. The Fed started buying bonds as far back as late 2008. Still, Fed officials have also stressed they are in no hurry to take policy tightening a step further by raising rates from near zero levels due to subdued inflation and the poor quality of a recovery in labour markets. Upbeat US earnings so far have also eased worries that corporate profits might be squeezed by sluggish global growth. With 245 companies in the S&P 500 having reported earnings so far for the third quarter, 73.5% have beat analyst expectations, according to Thomson Reuters. Over the past four quarters, 67% of companies have beat estimates. The picture in Europe isn’t quite so rosy. About a third of companies listed on the STOXX Europe 600 benchmark index have reported results so far this earnings season, with 67% of them meeting or beating profit forecasts, and 59% meeting or beating revenue forecasts, according to Thomson Reuters Starmine data.