US stocks hold gains after Fed minutes

Wednesday 21:00 BST. US stocks held on to early gains, Treasury bond prices suffered modest losses and the dollar edged up to its highest level of the session as investors digested the minutes of the Federal Reserve's policy-setting Open Market Committee meeting last month.

They showed that "several" participants thought a June interest rate rise would be warranted, while "a couple" preferred to wait until 2016.

"In our view, 'several' refers to three to four participants while a 'couple' refers to two," said Michael Gapen, an economist at Barclays.

"This means that the remainder prefer to take action in the September to December period, assuming that the outlook evolves in line with their expectations."

But while they highlighted the divergence of opinions among FOMC members on the possible timing of interest rate "lift-off", analysts noted that the minutes were already out of date given last week's extremely weak non-farm payrolls report for March.

"Indeed, the markets have pushed out the timing of the first Fed tightening to September," said Nick Stamenkovic, macro strategist at RIA Capital Markets.

"The chances of a June rate hike have diminished significantly recently following a sharp slowdown in employment growth at the end of the first quarter."

In New York, the S&P 500 equity index rose 0.3 per cent to 2,081, little changed from where it stood just before the minutes were released. The day's advance came against a backdrop of sharply lower oil prices, uncertainty over corporate earnings and a fresh outbreak of bid and merger activity.

The dollar index, a measure of the US currency against a basket of peers, was up 0.2 per cent at 98.01 - a move that helped push gold down $6 to $1,202 an ounce. The euro was 0.3 per cent lower at $1.0785.

The yield on the 10-year Treasury bond was up 1 basis point at 1.91 per cent, while the two-year was 1bp higher at 0.54 per cent.

US energy stocks lost ground as Brent crude tumbled 6 per cent to settle at $55.55 a barrel after data showed a much larger build-up of US crude inventories last week than had been expected and Saudi Arabia announced record production last month.

Alcoa will kick off the first-quarter US earnings season when it reports after the close of trade. Analysts have sharply cut their earnings per share forecasts for US companies, and the markets will be watching closely for any commentary on the impact of the strong dollar.

Across the Atlantic, the FTSE Eurofirst 300 index gave back an early advance to a seven-year high to finish fractionally lower. The UK's FTSE 100 fell 0.4 per cent, despite a 26 per cent surge for BG Group shares after Royal Dutch/Shell agreed a £47bn takeover of the company.

The pound was up 0.4 per cent versus the dollar at $1.4885 amid expectations for a pick-up in sterling demand because of the deal.

Asian stock markets put in more bullish performances as Hong Kong's Hang Seng index leapt 3.8 per cent to a near seven-year peak as trading resumed after a five-day holiday break.

The Shanghai Composite index rose 0.9 per cent to its best level since March 2008 while the Nikkei 225 in Tokyo rose 0.8 per cent to a15-year high, in spite of a rally for the yen after the Bank of Japan kept its policy stance unchanged. The dollar was down 0.2 per cent at Y120.03.

"The BoJ's next monetary policy meeting on April 30 will be watched more closely by market participants given that they will also release their latest semi-annual outlook for economic activity and prices report," said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.

"A potential downgrade to the inflation outlook would signal an increased likelihood of further easing later this year, especially if inflation fails to rebound as currently expected by the BoJ. We continue to believe that further BoJ easing is unlikely to provide a fresh trigger for renewed yen weakness in the near-term."

Meanwhile, German government bonds remained in demand as the European Central Bank's quantitative easing programme continued and amid lingering worries over Greece's debt negotiations.

The Bund yield fell 3bp to 0.16 per cent - just a whisker away from its lowest ever - as German manufacturing orders disappointed in February.

The strong demand for high quality sovereign was underlined by the fact that Switzerland sold 10-year bonds on Wednesday at a negative yield.

Greek bond yields rose and the country's main stock index fell 1.2 per cent ahead of Thursday's deadline for Athens to repay a €450m International Monetary Fund loan.

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