Stocks rise as Fed taper angst cools, dollar gains
Volatility eased as investors took the view that a Fed move to scale back its bond-buying, probably in the first three months of next year, does not necessarily mean official interest rates will rise soon afterward.
In the lingo of Wall Street, to taper is not to tighten.
Even after the U.S. central bank starts to scale back its stimulus, monetary policy is likely to be very accommodative for some time, perhaps for years, Atlanta Fed President Dennis Lockhart said on CNBC on Friday.
"The Fed will not start to taper until the economy is able to walk on its own; that's a positive," said Phil Orlando, chief equity market strategist at Federated Investors, in New York.
"From a catalyst perspective things are calm; we're sitting just off record highs and in the near term we're probably fairly valued."
MSCI's all-country world equity index, which tracks shares in 45 countries, rose 0.31 percent.
On Wall Street, the Dow Jones industrial average rose 15.64 points or 0.1 percent, to 16,025.63, the S&P 500 gained 4.61 points or 0.26 percent, to 1,800.46 and the Nasdaq Composite added 16.083 points or 0.41 percent, to 3,985.238.
Solid U.S. data this week also eased concern that weaker growth in China and the euro zone may set back the fragile global economic recovery, pointing to a gradually improving outlook for 2014, albeit with less Fed money printing.
Earlier in the global session, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 percent after shedding 1.4 percent on Thursday. Japan's Nikkei , getting an extra boost from the weaker yen, added 0.1 percent to edge close to its highest level of the year.
European equity markets were largely steady, with the broad FTSEurofirst 300 index 0.08 percent firmer, close to a 5-1/2-year closing high reached at the start of the week.
A closely watched measure of stock market volatility, the Euro Stoxx 50 Volatility index, sank to a near seven-year low.
The dollar gained strength against the yen despite signs of a more delayed Fed tapering schedule, reaching a peak of around 101.22 yen for the first time since July.
The euro climbed to a four-year high against the yen and rose for a second straight day versus the dollar after much-stronger-than-expected German business sentiment pointed to a continued rebound in Europe's largest economy.
The euro has gained from the swing higher in long-term U.S. Treasury yields, which has expanded the dollar's rate advantage over the yen. Yields on 10-year Treasuries were at 2.77 percent , compared with 0.64 percent for JGBs.
But the greenback fared less well against the euro, which bounced on Thursday when European Central BankPresident Mario Draghi shot down a report that the central bank was considering cutting a key interest rate below zero.
That had lifted the common currency from a one-week low of $1.3399 before news on Friday of a surprise rise in German business morale in November added to its allure to lift it further to around $1.3530.
Among commodities, Brent crude oil held near $110.34 a barrel, adding 12 cents to the $2 gained on Thursday to take the price to its highest in a month.
The rally has been fed by news of dwindling stocks and refinery glitches in the United States and Europe, as well as signs as that an imminent breakthrough in talks over Iran's nuclear program looks less likely.
U.S. oil was off 78 cents at $94.66 a barrel, but that followed a rise of $1.59 in the previous session.