Stocks extend gains after Fed keeps rates on hold; oil falls

 Stocks extend gains after Fed keeps rates on hold; oil falls

By Herbert Lash

NEW YORK (Reuters) - Global equity markets rose on Wednesday after the Federal Reserve indicated interest rates would remain on hold for some time - a positive for risk assets - while oil prices fell after data showed an unexpected increase in U.S. crude inventories.

New projections showed 13 of the U.S. central bank's 17 policymakers foresee no change in rates until at least 2021 as moderate economic growth and low unemployment are expected to continue through next year's presidential election.

That outlook nudged stocks on Wall Street higher as investors awaited a decision on whether U.S. President Donald Trump would allow his promised new tariffs on almost $160 billion of Chinese goods to go forward on Sunday.

The projection of no rate hikes for the foreseeable future is phenomenal when U.S. monetary policy over the last few decades is considered, said Kristina Hooper, chief global market strategist at Invesco in New York.

"We shouldn't treat that as boring or uneventful; this is actually very important. The bar is very high for any rate hikes," she said.

Hooper said the Fed is the key factor that has been driving the stock market, in addition to U.S.-China trade relations that have been centre stage for markets in recent weeks as negotiators try to hammer out a "phase one" deal.

"The Fed decision to sit on its hands and its outlook for 2020 should be positive for the stock market," she said.

MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 0.43%, while the pan-European STOXX 600 index <.STOXX> rose 0.22%.

On Wall Street, the Dow Jones Industrial Average <.DJI> rose 25.98 points, or 0.09%, to 27,907.7. The S&P 500 <.SPX> gained 9.56 points, or 0.31%, to 3,142.08 and the Nasdaq Composite <.IXIC> added 38.80 points, or 0.45%, to 8,654.98.

The 17-month trade war has roiled capital markets and crimped global growth, noticeably in China. Paramount in investors' minds is the looming Dec. 15 U.S. deadline on tariffs, with no immediate clarity on what the decision will be.

After U.S. stocks set new highs two weeks ago and MSCI's global gauge of equity performance came within two points of an all-time peak, stocks slid.

"The market's waiting for Godot, waiting on the tariffs," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

The White House's top economic and trade advisers are expected to meet with Trump in coming days on a decision, a source told Reuters.

Confidence has grown as Sunday approaches that Trump will do something to keep the trade talks on track, which has increased risk-on sentiment in the market, Ghriskey said.

Jamie Dimon, chief executive at JPMorgan and chairman of The Business Roundtable, a trade group of top U.S. CEOs, said he expected a phase-one U.S.-Sino trade deal to be finalised and said not doing so would be "negative" for markets.

Gold rose and extended gains during comments by Fed Chair Jerome Powell, while the U.S. dollar trended lower.

U.S. gold futures settled 0.5% higher at $1,475.

Investors also await the first European Central Bank meeting with Christine Lagarde as president on Thursday, as well as a general election in Britain that could determine the fate of the country's exit from the European Union.

The dollar index <.DXY> fell 0.35%, with the euro up 0.38% to $1.1134. The Japanese yen strengthened 0.13% versus the greenback at 108.58 per dollar.

The British pound , a high-flier of late, dropped from a seven-month peak after an opinion poll projected a narrower-than-expected victory for the Conservative party in the UK election.

Benchmark 10-year U.S. Treasury notes rose 11/32 in price to yield 1.7931%.

In the Middle East, Saudi Aramco <2222.SE> shares surged 10% above their initial public offering price on their first day of trading. That gave the state-controlled oil company a market value of about $1.88 trillion, making it the world's most valuable listed company.

Oil prices fell after U.S. crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories also rose, data from industry group the American Petroleum Institute shows.

Brent futures settled down 62 cents at $63.72 a barrel. West Texas Intermediate crude slipped 48 cents to settle at $58.76 a barrel.

(Reporting by Herbert Lash; Editing by Sonya Hepinstall and Dan Grebler)

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Updated Date: Dec 12, 2019 03:06:05 IST