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 Wall Street was set to build on Tuesday's gains, which saw the S&P
500 recorded its highest close of the year after Federal Reserve
Chair Janet Yellen urged caution on further rate hikes in the
world's largest economy amid calls from some policymakers for faster
action.
The dollar was set for its worst quarter in five years against a
basket of currencies, weakening further after its biggest
one-day fall in nearly two weeks.
That move pumped up the euro <EUR=> to its highest in almost two
weeks and pulled Germany's 10-year bond yields -- the European
benchmark -- towards record lows, as markets shrugged off German
inflation data showing that the European Central Bank's expansionary
monetary policy may be gaining traction.
"She (Yellen) seemed very biased towards the dovish side and the
market is taking that as a signal that the Fed is maybe trying to
engineer a weaker currency or a more buoyant financial market, or
possibly both," Altana Hard Currency Fund manager Ian Gunner, said.
Futures markets dialed back their expectations of a rate hike to
late 2016 from mid-year, in what some analysts said might be a
slight overreaction.
The MSCI world equity index, which tracks shares in 45 countries,
rose 0.8 percent to 397.84, the closest it has been to highs of over
399 set in early January.
The pan-European FTSEurofirst 300 index advanced 1.4 percent
after Asian shares outside Japan reversed four sessions of losses to
jump 2 percent.
Japan's Nikkei was a rare loser, nudged lower by a rise in the
yen against the dollar.
Debt markets rallied in response to Yellen's speech, with yields on
10-year U.S. paper dropping 7 basis points to a one-month low of
1.80 percent. German equivalents fell 2 bps to 0.13 percent, within
touching distance of this year's trough of 0.102 percent and an
all-time low of 0.05 percent hit last year.
Bund yields gave up some of those early falls after inflation data
from Germany's regions showed consumer price growth in the bloc's
powerhouse likely turned positive in March, but remained lower on
the day.
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"It looks like a bounceback in Germany after a soft set of February
data, but the big picture is still one of very low inflation,"
Kenneth Wattret, co-head of European market economics at BNP
Paribas, said in the Reuters Global Markets Forum.
(http://emea1.apps.cp.thomsonreuters.com/cms/?pageId=gmf_main-p)
"If you can't generate inflation there, there is not much chance for
the rest of the euro zone. The ECB is trying hard but it's going to
be a long wait for inflation lift-off."
The drop in the dollar helped oil prices regain a little ground, as
did a forecast that U.S. stockpiles may have grown by less than
first thought.
U.S. crude added 70 cents to $38.98 a barrel, after falling around 3
percent on Tuesday. Brent rose 57 cents to $39.70. [O/R]
Gold was down slightly at $1,235.16 an ounce, after rising
almost 2 percent overnight.
(Additional reporting by Jemima Kelly and Kirsten Donovan in London,
and Wayne Cole in Sydney; Editing by Raissa Kasolowsky and John
Stonestreet)
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