World stocks rallied on Friday, putting them on course for their biggest weekly rise in four years after minutes of the Federal Reserve's last policy meeting showed the US central bank is in no rush to raise interest rates. Investors' relief that the Fed probably won't move until sometime next year saw them take on more risk across the board, with commodities in particular recovering some of their recent heavy losses to chalk up their biggest gains in years.
Brent crude oil was on track for its biggest weekly rise since March 2009, while zinc soared 9 % - its biggest daily gain for seven years - after troubled mining giant Glencore said it would cut production.
Glencore shares themselves surged 12%, meaning they were up 41% on the week - their biggest weekly rise since being floated in mid-2011 - and doubling from the record low reached only two weeks ago.
At midday in Europe, the MSCI world equity index was up 0.8%. That was the eighth rise in a row, and put the index up 4.5 % on the week, its best performance since late 2011.
The FTSEuroFirst index of the leading 300 European shares was up 0.8% on the day and up 5% on the week. Germany’s DAX and France’s CAC 40 were both up 1%.
“The Fed is at an important junction. It’s not in a position to act before elaborating a more sophisticated road plan, so it is keeping the punchbowl on the table,” said Ipek Ozkardeskaya market analyst at London Capital Group.
The Fed minutes revealed the extent to which policymakers are concerned that a global economic slowdown might threaten the US economic outlook. Though they said overseas turmoil had not “materially altered” economic prospects, they opted to hold interest rates steady last month.
An unexpectedly weak US jobs report for September last week had led many investors to speculate that the Fed will not deliver its first hike since 2006 until 2016, a feeling that was strengthened by the minutes.
Earlier in Asia MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.8%, on track for a robust weekly gain of 6.9%, its best week in four years. Japan’s Nikkei rose 1.6%.
US futures pointed to a flat open on Wall Street as the US earnings season gets into full swing. On Thursday, the S&P 500 registered its highest closing level in seven weeks.
Feelgood Factor
The relief rally and bargain-hunting across commodities and emerging markets got a shot in the arm on Friday, with Brent crude oil futures on course for a rise of more than 11% on the week.
Brent was last up 0.8 % on the day at $53.46 a barrel, and US crude was up 1.2% at $50.01 a barrel. Oil also got a boost overnight after forecaster PIRA Energy Group predicted crude prices would rise to $70 per barrel by the end of 2016.
The Indonesian rupiah had its best week in more than 14 years, up almost 9%, and the Malaysian ringgit chalked up its best weekly performance since authorities pegged the currency in 1998.
“Investors love these Fed minutes because they signal a strong economy and low rates,” said Jasper Lawler, market analyst at CMC Markets in London.
“If the decision was a close call then the message is that the Fed feels good about the US, but is just being cautious over emerging markets,” he said
Three-month zinc futures were up 10% on the London Metal Exchange at $1,844 a tonne after Glencore said it will cut production by 500,000 tonnes, equivalent to 4% of the world’s output.
Zinc had fallen 30% since May to a five-year low, so the rebound could mark the bottom of the market and the commodities complex in general, some analysts said.
Still, there are grounds for caution in commodities, as highlighted by Alcoa’s third quarter profit miss announced on Thursday
In currencies, the dollar retreated on the back of the dovish Fed minutes, with the dollar index down a half of 1% and the euro up 0.75% at $1.1363.
The 10-year US Treasury yield slipped a basis point to 2.10 %, as did the 30-year yield to 2.93%.
On Thursday HSBC issued one of the boldest US and European yield forecasts of all the big investment banks, predicting the 10-year US yield will fall to 1.5% and the equivalent German bund yield at just 0.2% next year.
