US: Dow positive for 2016 as global markets digest dovish Fed

[NEW YORK] The Dow surged into positive territory for the first time in 2016 on Thursday and the dollar sank a day after the US Federal Reserve's dovish interest rate stance.

European markets were mixed as the stronger euro raised concerns about a negative impact on eurozone exports.

The Dow Jones Industrial Average climbed 0.9 per cent as investors cheered the Fed's signal of a more gradual path of interest rate increases. US stocks were further lifted by stronger oil prices and by a big drop in the dollar.

"We're back to game-on," said Mace Blicksilver, director of Marblehead Asset Management. "The Fed took themselves off the table." But bourses in Frankfurt and Paris slid by 0.9 per cent and 0.5 per cent, respectively, on worries about the euro's surge against the dollar.

"The rapid appreciation of the euro has the potential to hurt eurozone exporters which have benefited from its weakness," said Oanda analyst Craig Erlam.

Having touched US$1.10 last week, the euro shot above $1.13 as investors in the eurozone got their first chance to react to the Fed.

London's FTSE managed a gain of 0.4 per cent after the Bank of England kept its key rate on hold at a record low 0.50 per cent as expected.

Japan's Nikkei dipped 0.2 per cent as the yen strengthened.

Market sentiment has shifted from the first six weeks of 2016 that saw global stocks retreat on a combination of anxieties over falling oil prices, the weakening China economy and expectations for more Fed tightening.

The Fed on Wednesday trimmed its US growth forecast and projected a slower path of future rate increases in light of global growth worries, seeing only two this year after penciling in four in December.

However many analysts are skeptical the US central bank will be that aggressive.

"It feeds these suspicions that the Fed is canceling the rate cycle slowly but surely," said JPMorgan Chase analyst John Normand.

"The fear of tightening has been hanging over all markets," said Chris Low, chief economist at FTN Financial.

Commodity-linked shares mostly surged, with British-listed miner Anglo American jumping 9.8 per cent, French steel company ArcelorMittal rising 10.0 per cent and US oil company ConocoPhillips gaining 2.7 per cent.

FedEx vaulted 11.8 per cent as it reported fiscal third-quarter sales of US$12.7 billion, up 8.5 per cent from the year-ago period. The package-delivery giant also lifted its 2016 profit forecast range.

The biggest faller in Frankfurt was German airline Lufthansa, whose share price slumped 4.6 percent despite news of soaring 2015 profits.

In Tokyo, Toshiba plunged nearly eight percent on a report that the company is under investigation by US authorities over allegations it hid US$1.3 billion in losses at its nuclear power operations.


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