European equity-index futures followed Asian stocks and the dollar higher, while Treasuries recouped losses as investors took the Federal Reserve at its word that it’s in no hurry to add to the first U.S. interest-rate increase in almost a decade.
Japanese shares jumped a second day, Chinese stocks advanced and gauges of regional equity volatility declined after the well-telegraphed decision, which saw Fed Chair Janet Yellen emphasize further tightening would be slow. The dollar climbed versus the euro and New Zealand’s, while the yuan retreated for a 10th day. Treasuries gained, with 30-year note yields falling back below 3 percent. Oil was little changed after tumbling earlier this week to the lowest since 2009.
The reaction in financial markets to the first rate increase since before the 2008 recession reflected conviction among investors that the U.S. economy is strong enough to withstand higher borrowing costs, even amid lackluster inflation. A Merrill Lynch index of anticipated price swings in Treasury notes dropped the most in a year, while volatility expectations for euro-dollar over one month slid to the lowest level since February — on track for the biggest monthly net decline since April 2009.
The decision ends an era of unprecedented monetary stimulus that pushed stocks into a 6 1/2-year bull market, adding $ 15 trillion in value. Investors will now find out how assets from shares to corporate and government bonds fare without the central bank stoking economic growth as aggressively. Yellen signaled the pace of subsequent increases will be “gradual” and in line with previous projections.
Futures on the Euro Stoxx 50 Index advanced 1.8 percent by 7:23 a.m. in London, while contracts on the FTSE 100 Index and Germany’s DAX gained at least 1.3 percent. The MSCI Asia Pacific Index climbed 0.9 percent, extending Wednesday’s 2.2 percent surge. Japan’s Topix index rose to the highest level since Dec. 8. The Nikkei Stock Average Volatility Index slid 13 percent, its biggest daily drop since August.
Source : Bloomberg