At the end of the day, it was all about the dollar.
Starting March 18, the Bloomberg Dollar Spot had risen as much as 1.9% as Fed officials including Lacker, Williams and Bullard noted upside risks on rate-hike projection and suggested a rate hike may be imminent as soon as April. And then Yellen unleashed the latest round of dovishness, when she made it very clear that the Fed is no longer just the U.S. central bank, but that of the world (but mostly China) and as such its prerogative is to not only keep stocks high, but to also assure there is no currency crisis in Beijing (where a month ago she met other G-20 central bankers to decide precisely this).
The result of Yellen's much discussed speech, was an immediate plunge in the Dollar spot index of 1.2% to 8 month lows, its worst month in 5 years, a drop which has continued this morning, and is on par to equal the dollar's tumble from the first week of March when Bill Dudley likewise came out very dovish, and when the index dropped 1.7% within a week.
What is notable about these two crying doves is that both have roundly ignored the simmering "mutiny" by the Fed's hawks (remember Hilsenrath's humorous "The Decline of Dissent at the Fed" last week) advice of central banker incubator Goldman Sachs, that it is in the US interest to push the dollar higher (it had a report just last week titled "Inflation Finally Begins to Firm"). It will be very interesting to see how this particular conflict is resolved.
For now, however, the die has been cast, and the result is a surge in risk assets around the globe: stocks jumped in Asia (except in Japan where the Yen strength pushed the Nikkei lower by 1.3%, however the Shanghai's 2.3% jump just over 3000 should more than make up for that) and Europe, with US equity futures 0.6% higher at this moment. Commodities climbed as the dollar extended its worst month in more than five years.
The reason for this stock surge, as we noted last night, is absurdly delightful: Yellen signaled "weakening world growth" and "less confidence in the renormalization process." In other words, the "bad news is good news" mantra is back front and center.
Credit to Zero Hedge
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