The hawkish tone and global bond tantrum unleashed by central bankers at the Sintra ECB forum two weeks ago is now a distant memory, and after Janet Yellen surprised markets with an unexpectedly dovish (in the market’s interpretation) testimony yesterday, overnight global shares hit their fourth all-time high in less than a month as concerns about the tightening Fed were laid to rest, sending September and December rate hike odds sliding.
One of the Fed chief’s comments that markets latched on to was her view that bank would not need to raise U. S. rates “all that much further” to reach current low estimates of the “neutral” funds rate. Yellen’s dovish relent lifted Wall Street to a new all time high, while lowering bond yields virtually everywhere and sending the MSCI All-Country World Index to a fresh record while European shares headed for their biggest two-day gain in almost three months.
Yellen’s testimony had the added impact of diverting attention from Trump Jr.’s emails about his meeting with a Russian lawyer, which sent stocks sliding on Tuesday, though concern remains that the latest saga in Washington will likely delay, perhaps permanently, Trump’s fiscal reform efforts. The dovish Fed also sent the Bloomberg Dollar Spot Index to the lowest since September while gold climbed.
This post was published at Zero Hedge on Jul 13, 2017.
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