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Banks Lead Global Rally as Yellen Buoys Equities

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Banks led broad gains in global stocks after Janet Yellen said the Federal Reserve doesn’t need to wait for the Trump’s administration’s plans on fiscal stimulus to hike rates. The dollar and bonds were little changed.

Equities from Tokyo to Taipei rose after four major American equity benchmarks closed at unprecedented levels for a second day as Yellen said waiting too long to raise rates could disrupt financial markets. Chinese stocks in Hong Kong jumped the most in almost three months after record new credit fueled optimism about the strength of the economy. Other assets were more muted, with the dollar steady and the yield on the 10-year Treasury note flat after both rose for four straight days.

Trump reflation trades were back in vogue after Yellen’s comments, with odds for an increase in U.S. borrowing costs next month climbing to 34 percent. Inflation data Tuesday from China to America showed accelerating price gains at factories, bolstering the case for tightening before a reading on U.S. consumer price data Wednesday.

Currencies

The Bloomberg Dollar Index was little change as of 3:51 p.m. in Tokyo, after a four-day advance. The yen fell 0.1 percent to 114.33 per dollar, after a two-day slide of 0.9 percent.

The Taiwanese dollar strengthened 0.4 percent, while the Korean won slipped 0.4 percent.

Stocks

The MSCI All-Country World Index climbed 0.2 percent to 442.12, the highest level since May 2015 when the index reached an all-time closing high of 442.70.

The Hang Seng China Enterprises Index gained 1.8 percent. Agricultural Bank of China Ltd. surged 6.1 percent. Bank of China Ltd. and Industrial & Commercial Bank of China Ltd. advanced more than 2.5 percent.

The Topix index rose 1 percent. Mitsubishi UFJ Financial Group Inc. jumped 1.7 percent to the highest in more than a year. Toshiba Corp. tumbled for a second day after reporting that it expects to book a $6.3 billion writedown in its nuclear power business.

Australia’s S&P/ASX 200 Index added 0.9 percent. South Korea’s Kospi increased 0.5 percent. Taiwan’s Taiex climbed for a fifth day to the highest since May 2015.

Futures on the S&P 500 were little changed. The benchmark measure rose 0.4 percent on Tuesday, for a sixth straight gain. Financial shares in the gauge jumped 1.2 percent to the highest since December 2007.

Commodities

Oil dropped below $53 a barrel as U.S. industry date showed crude stockpiles expanded, signaling a worsening inventory overhang. WTI futures fell 0.7 percent to $52.83.

Gold slipped 0.2 percent to $1,225.95 an ounce.

Copper rose 0.3 percent in London as UBS said the rally has “more to go” amid mine supply disruptions and rising China demand.

Bonds

Australian 10-year yields jumped five basis points to 2.79 percent, after rates on similar-dated Treasuries rose three basis points the prior session.

The yield on 10 year Treasuries fell for the first time in five days, losing less than one basis point to 2.47 percent.

Source: Bloomberg