While you were sleeping: Fed minutes, Tiffany shines

Wall Street gained as the minutes from the latest US Federal Reserve meeting bolstered expectations that policy makers will keep easy money flowing to help accelerate the pace of growth in the world’s largest economy.

"I suspect they are going to continue this low interest rate environment, very accommodative monetary policy, for a very long period of time in an effort to help markets feel a little bit calmer as it relates to a hike in interest rates," Joseph Tanious, global market strategist at JP Morgan Asset Management, told Reuters.

Policy makers said they were not concerned that inflation might accelerate as a result of the central bank’s efforts to bolster the rate of job creation.

“Because inflation was expected to remain well below the Committee’s 2 percent objective and the unemployment rate was still above participants’ estimates of its longer-run normal level, the Committee did not, at present, face a tradeoff between its employment and inflation objectives, and an expansion of aggregate demand would result in further progress relative to both objectives,” according to the minutes.

With about an hour of trading left in the day in New York, the Dow Jones Industrial Average rose 0.88 percent, the Standard & Poor’s 500 Index added 0.66 percent, while the Nasdaq Composite Index gained 0.65 percent.

Gains in shares of Goldman Sachs, up 2 percent, and United Technologies, up 1.4 percent, led the Dow higher.

Policy makers discussed the importance of communicating their plans to unwind monetary stimulus.

“Participants generally agreed that starting to consider the options for normalisation at this meeting was prudent, as it would help the Committee to make decisions about approaches to policy normalisation and to communicate its plans to the public well before the first steps in normalising policy become appropriate,” according to the minutes.

“Early communication, in turn, would enhance the clarity and credibility of monetary policy and help promote the achievement of the Committee’s statutory objectives,” the minutes showed.

“Because the Federal Reserve has not previously tightened the stance of policy while holding a large balance sheet, most participants judged that the Committee should consider a range of options and be prepared to adjust the mix of its policy tools as warranted,” according to the minutes. “Participants generally favoured the further testing of various tools, including the TDF [term deposit facility], to better assess their operational readiness and effectiveness.”

In the latest US earnings, Tiffany surpassed expectations and raised its full-year profit outlook. Its shares gained 8.6 percent.

“This is an excellent and encouraging start to the year,” Michael Kowalski, Tiffany's chief executive officer, said in a statement. “We were pleased with the strong and broad-based sales growth across most regions and product categories and our ability to leverage those improved sales into very significant growth in operating and net earnings.”

Thomson Reuters data through Wednesday showed that of 478 companies in the S&P 500 that have reported earnings so far this season, 68 percent surpassed expectations.

"The economy is shifting gears, and the biggest risk to business profits is the failure to recognise that labour turnover rates and compensation could soar in the latter part of this year and especially in the first part of 2015," Joel Naroff of Naroff Economic Advisors told Reuters.

In Europe, the Stoxx 600 Index finished the day with an increase of 0.6 percent from the previous close, as did Germany’s DAX. The UK’s FTSE 100 added 0.3 percent, while France’s CAC 40 rose 0.4 percent.

Here, signs of increased consumer confidence helped lift the mood. The European Commission’s preliminary measure of consumer sentiment in the euro zone increased to minus 7.1 in May, the highest level since October 2007, up from minus 8.6 in April.

Even so, many expect the European Central Bank to ease monetary policy at its next meeting in June, as flagged by its president, Mario Draghi.

(BusinessDesk)

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