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While you were sleeping: More cold water on US rates

08 Apr 15

Wall Street gained after a Federal Reserve official suggested policy makers should be "extraordinarily patient" in lifting interest rates.

"[M]onetary policymakers should be extraordinarily patient about reducing the level of monetary accommodation," Minneapolis Fed President Narayana Kocherlakota said.

He pointed to the US labour market saying that by some key metrics, it improved more in 2014 than it had in almost 20 years, though, by these same metrics, "we would need to see at least three more years like 2014 for labour market conditions to return to their 2006 levels."

Minutes from the latest Federal Open Market Committee are scheduled to be released on Wednesday.

"The FOMC can only achieve its congressionally mandated price and employment goals by being extraordinarily patient in reducing the level of monetary accommodation," Kocherlakota said. "Under my current outlook, I continue to believe that it would be a mistake to raise the target range for the fed funds rate in 2015."

On Monday New York Fed President William Dudley suggested rate increases will be "relatively shallow," while Fed Bank of Atlanta President Dennis Lockhart told Bloomberg he favoured pushing out the central bank's first rate rise beyond the next two meetings, saying "I would probably be biased toward the July or September dates as opposed to June."

In afternoon trading on Wall Street, the Dow Jones Industrial Average rose 0.52 percent, the Standard & Poor's 500 Index added 0.27 percent, while the Nasdaq Composite Index gained 0.43 percent.

Gains in shares of Chevron and those of Johnson & Johnson, last up 1.9 percent and 1.7 percent respectively, led the Dow higher.

"The Fed would rather err on the side of caution," Jasper Lawler, a market analyst at CMC Markets in London, told Bloomberg. "They're dovish by nature. They don't want to make a mistake of lifting off too soon."

Shares of FedEx rose, last up 3 percent, after the company agreed to buy TNT Express of the Netherlands for US$4.8 billion, betting it will find approval from regulators who blocked a UPS bid to buy TNT in 2013. TNT shares rallied 28.1 percent.

"When you have money in the bank and you either have to return it to shareholders or do something with it ... the next thing is you buy a competitor," Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh, told Reuters. "You put that cash to work."

Shares of Twitter climbed, last up 3.4 percent, amid a Barron's report about rumours the company has hired advisers to fend off a takeover bid.

In Europe, the Stoxx 600 Index ended the session with a 1.6 percent increase from the previous close.

Germany's DAX gained 1.3 percent, France's CAC 40 Index advanced 1.5 percent, while the UK's FTSE 100 Index climbed 1.9 percent.