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 The dollar jolted lower, while oil and commodity prices rose. Bond
yields in large parts of Europe, which have plunged during years of
cheap funding from the Fed and the world's other major central
banks, hit new record lows.
Minutes of the Fed's Sept. 16-17 meeting published late on Wednesday
showed officials were wary about the dual threats of a stronger
dollar and recent wobbles in the world economy as they seek an
eventual exit from record low rates.
There were big gains on Wall Street and for Asia stocks, and
European shares duly followed suit as Britain's FTSE 100, Germany's
DAX and France's CAC 40 rose 0.7, 1.2 and 0.8 percent respectively
in early trading.
"It (the Fed's message) has stabilised risk appetite and it was well
needed following the macro economic disappointments we have had
recently," said Hans Peterson, global head of asset allocation at
SEB investment management. "It is a burning issue, the pace of U.S.
interest rate rises. They will tighten of course, but it will
probably be very slow."
Even news that German exports slumped 5.8 percent in August -- their
biggest fall since the height of the financial crisis in January
2009, and yet another sign that Europe's largest economy is
faltering -- failed to dampen the mood.
Spanish and Belgian bond yields hit record lows and German Bunds
edged towards them in a broad-based euro zone debt rally, while many
emerging market bonds and currencies jumped.
MSCI's broadest index of Asia-Pacific shares outside Japan, which
touched its lowest level since March in the previous session, was up
about 1.2 percent in late trade. Japan's Nikkei share average
skidded 0.8 percent, however, as the yen rose against the weakened
dollar.
"Fed officials have concerns on the impact of a strong dollar, which
undermines the scenario held by some that Japanese shares will
benefit from further strength in the dollar against the yen," said
Masayuki Doshida, senior market analyst in Tokyo for Rakuten
Securities.
RATE DEBATE
U.S. interest rate futures reacted swiftly to the minutes, with June
2015 eurodollar interest rate futures hitting a contract high as
traders scaled back expectations the Fed will raise rates by the
middle of 2015.
The rate-sensitive two-year U.S. Treasury note yield hit a
seven-week low of 0.444 percent. The 30-year bond yield dropped to a
17-month low of 3.039 percent.
In the currency market, where the dollar had gained sharply over the
past three months on the perception that higher U.S. rates down the
road will attract more funds, investors rushed out of dollar-buying
positions.
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The dollar's index against a basket of six major currencies slipped
as low as 85.046 in early European trading, its lowest level in
about two weeks and well off a four-year high of 86.746 hit on
Friday.
For the euro it meant a fourth day of upward momentum. It was at a
session high of $1.2769 at 0815 GMT despite the weak German data,
while the yen was at a three-week high, with a dollar worth 107.85
yen.
"It appears likely now that the dollar index’s record run of 12
consecutive weekly gains will be brought to an end this week," said
Lee Hardman, a currency analyst at Bank of Tokyo-Mitsubishi in
London. In commodities trading, U.S. crude oil prices rebounded
from a 1-1/2-year low hit overnight, adding about 0.2 percent to
$87.60 per barrel, while Brent crude, the European benchmark, rose
off Wednesday's two-year low to gain 0.2 percent on the day to
$91.57. A weaker dollar makes dollar-denominated assets
cheaper for holders of other currencies.
Gold, which also tends to benefit from loose monetary policy,
climbed to its highest in about two weeks, with spot gold rising
about 0.4 percent to $1,226.40 an ounce.
The Fed was not the only central bank in action though.
The British pound stood at $1.6165, steady on the day and holding
above an 11-month low of $1.5943 on Monday, ahead of the Bank of
England's policy announcement later in the session. The bank is
expected to keep rates steady near record lows.
(Additional reporting by Thomas Wilson in Tokyo and Masayuki Kitano
in Singapore; Editing by Catherine Evans)
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