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GLOBAL MARKETS-Stocks gain on economic data, dollar steady as Fed meets

Tue, 15th Sep 2020 20:09

(Adds gold, oil settlement prices)

* China's yuan surges to 16-month high on economic data

* Gold slips as dollar rebounds, all eyes on Fed

* Oil rises but bleaker demand outlook weighs

* Central bank meetings dominate week's agenda

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

*

By Herbert Lash

NEW YORK, Sept 15 (Reuters) - Global equities rallied on
Tuesday, first on upbeat Chinese data and later on an increase
in U.S. factory output, while the dollar see-sawed on
uncertainty regarding the Federal Reserve's outlook on the
economy when policymakers meet this week.

Gold retreated and investors drove longer-term U.S. Treasury
yields higher, steepening the closely-watched yield curve, as
the Fed began a two-day meeting.

U.S. factory production increased for a fourth straight
month in August despite signs of strain in the recovery, while
U.S. import prices rose more than expected, supporting the view
that inflation pressures were building.

The Fed in the last Federal Open Market Committee meeting
embarked on a new approach to inflation, voting to allow its
pace to run above average for longer to ensure the recovery
isn't snuffed just when the economy begins to roll.

"We believe the Fed's commitment to stoking inflation could
cause dramatic volatility in interest rates, which could hurt
stock prices," said Andrew Smith, chief investment strategist at
Delos Capital Advisors in Dallas.

Data showed Chinese industrial output accelerated the most
in eight months in August, up 5.6%, to spark a jump in the yuan
to a 16-month high. Retail sales in China also grew for
the first time this year, beating forecasts.

Commodity-linked currencies such as the Australian,
New Zealand, and Canadian dollars gained after
the positive Chinese data.

"China is an economic winner at this point in the pandemic,"
said Kit Juckes, head of FX strategy at Societe Generale.

MSCI's all-country world index rose 0.65% to
576.43, while Europe's broad FTSEurofirst 300 index
added 0.71% to 1,439.08.

On Wall Street, the Dow Jones Industrial Average rose
0.29%, the S&P 500 gained 0.72% and the Nasdaq Composite
added 1.38%.

The S&P tech index jumped 1.0% as it recovered for
a second day from a plunge at the end of last week that had
knocked the Nasdaq into corrective territory, defined as a 10%
slide from a recent peak.

MSCI's emerging markets index rose 0.75%.

The euro initially gained after the ZEW economic sentiment
survey showed investor sentiment in Germany rose in September,
but later slipped amid headwinds from Brexit and rising
coronavirus infections.

Euro zone bond yields were steady to a bit lower, shrugging
off the positive economic sentiment data from Germany and the
improvement in risk appetite that lifted global stock markets.

The dollar index rose 0.024%, with the euro
down 0.16% to $1.1849.

The Japanese yen strengthened 0.26% versus the
greenback at 105.45 per dollar.

Overnight, MSCI's broadest index of Asia-Pacific shares
outside Japan added 0.5% for a fourth straight
day of gains that have boosted it 3% for the year after its
recent reversal from its coronavirus plunge.

In commodity markets, most industrial metals were bolstered
by the robust Chinese data.

Oil prices rose, supported by hurricane supply disruptions
in the United States, but forecasts of a slower-than-expected
recovery in global demand from the pandemic weighed.

Brent crude futures rose 92 cents to settle at
$40.53 a barrel. U.S. crude futures settled up $1.02 at
$38.28 a barrel.

Gold slipped from a near-two week high as the dollar rose,
although hopes for a dovish monetary policy stance from the Fed
limited the safe-haven metals' losses.

U.S. gold futures settled up 0.1% at $1,966.20 an
ounce.

(Reporting by Herbert Lash, additional reporting by Elizabeth
Howcroft in London; editing by Daniel Grebler and Nick
Zieminski)

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