London/Singapore - Global stocks jumped to a five-year high yesterday, led by emerging markets, and metals rallied after the US Federal Reserve unexpectedly refrained on Wednesday from tapering monetary stimulus. Corporate creditworthiness improved to its best level in two years while the yen weakened.
The MSCI all-country world index was up 1.2 percent by 11.30am in London, led by the biggest gain in Turkish shares since November 2008. Standard & Poor’s 500 index futures added 0.5 percent after the US gauge leapt 1.2 percent to close at a record on Wednesday.
The cost of insuring high-yield company bonds against losses fell 4.4 percent to the lowest since May 2011. The yen lost 1 percent against the dollar and the yield on 10-year German bunds slid 10 basis points to 1.90 percent. Copper jumped 2 percent and West Texas intermediate oil rose 0.6 percent.
US policymakers said they wanted more evidence of an economic recovery before paring a quantitative easing (QE) programme buying $85 billion (R841bn) of bonds a month.
Fed chairman Ben Bernanke said the central bank must determine its policies based on “what’s needed for the economy”, even if it surprised markets. He had said in June that the Fed might start curbing stimulus this year and end it in 2014 if the US economy finally achieved sustainable growth.
Reports on US jobless claims, home sales and leading indicators were due yesterday.
“Bernanke had threatened to take away the punchbowl and bring the QE party to an end,” Kit Juckes, a global strategist at Société Générale in London, said yesterday. “But he’s changed his mind, found more happy juice, and told us all to ‘Party on, dude!’.”
The Stoxx Europe 600 index rallied 1 percent to a five-year high. Mining firms led gains, with Randgold Resources, Fresnillo and Lonmin climbing at least 6 percent. The volume of share trades in the Stoxx 600 was 50 percent greater than the 30-day average.
The Stoxx 600’s relative strength index rose to 70.18, breaching the level of 70 that indicates an “overbought” state for the first time in a month.
The MSCI emerging markets index jumped 2.3 percent, paring this year’s decline to 3 percent. Stocks in Istanbul leapt 7.4 percent, taking gains since a low on August 28 to more than 20 percent. Jakarta stocks rallied 4.7 percent, the most in almost two years, and the rupiah gained 1.7 percent against the dollar.
India’s Sensex rose 3.4 percent and the rupee rallied 2.4 percent, paring this year’s drop to 11 percent.
Gold was little changed at $1 363.65 an ounce, after Wednesday’s 4.1 percent gain.
The yen slid after a Bank of Japan policymaker said pressure might mount to expand on unprecedented monetary stimulus. – Bloomberg