GLOBAL MARKETS-Stocks cheer dovish Fed as bond rumblings return

* Equities climb on Fed's bullish and supportive view
* Fed sees 2021 GDP growth of 6.5%, unemployment at 4.5%
* Fed says will keep rates low through 2023
* Bonds sell off, though, with 10-year Treasury yields near
1.75%

By Marc Jones
LONDON, March 18 (Reuters) - World share markets edged
higher on Thursday after the U.S. Federal Reserve promised to
keep its support in place, though another rise in global bond
yields and the dollar showed not everyone was convinced.
MSCI's 50-country world index .MIWD00000PUS was near
record highs after the Fed, which had also predicted bumper U.S.
growth, had lifted Wall Street and Asia overnight .N , and
Europe opened with Germany's DAX .GDAXI at a record high.
.EU
For traders worried about it all being snuffed out by rising
borrowing costs, though, euro zone government bond yields were
already tracking upward moves in benchmark 10-year U.S.
Treasuries as they climbed to a 13-month high of 1.74%.
GVD/EUR
That also revitalised the dollar, which had briefly dropped
to a two-week low after the Fed had pushed back against
speculation it could be starting to think about interest rate
hikes. /FRX
The U.S. central bank sees the economy growing 6.5% this
year, which would be the largest jump since 1984. Inflation is
expected to exceed its preferred level of 2% to 2.4%, although
it is expected to drop back in subsequent years.
"I don't know what the Fed can do to stop a rise in yields
that is based on stronger fundamentals," said BCA chief global
fixed income strategist Rob Robis, pointing to the $1.9 trillion
U.S. stimulus package that will drive growth.
"The path of least resistance is still towards higher
yields," he said. "The U.S. Treasury market leads the world and
every bond market responds."
Another day of central bank action was in store too.
The Bank of Japan and Bank of England
are both meeting, Norway signalled a possible hike
this year and in emerging markets Turkey's central
bank was facing a crucial test of confidence after a torrid
month for the lira. The dollar index, which measures the greenback against a
basket of its peers, rose as much as 0.4% to 91.671. It had
dropped to 91.300 after Wednesday's Fed meeting. /FRX
That eased the euro back to $1.19505 EUR= from a one-week
high of $1.19900. Against the yen, the dollar gained 0.3% to
109.120 yen JPY= .
The British pound traded flat at $1.3963 GBP=D3 . The Bank
of England is expected to keep its benchmark Bank Rate at a
historic low of 0.1% and its bond-buying programme unchanged at
895 billion pounds.
"Similar to what we've seen from the Fed, the Bank of
England will talk up their prospects of the economy relative to
where we've been, but at the same time emphasize that we're
still a long way from full recovery," said Rodrigo Catril,
senior currency strategist at National Australia Bank in Sydney.
The Australian dollar rose to a two-week high of $0.7849
AUD=D4 after data showed the nation's economy created more
than twice as many jobs as expected in February. New Zealand counterpart lost momentum, however, after the
country posted a surprise contraction in fourth-quarter GDP.
PALPITATIONS
Overnight, Asia-Pacific shares excluding those in Japan
.MIAPJ0000PUS rose 0.8%. Stocks in China .CSI300 rose the
same. Australia .AXJO fell 0.7%.
Wall Street futures were also pointing lower, with S&P 500
futures ESc1 down 0.4% and Nasdaq futures down over 1% NQc1 ,
amid the pressure higher U.S. rates tend to put on tech firms
with stratospheric valuations. .N
While inflation is expected to reach 2.4% this year, Fed
Chair Jerome Powell called it a "temporary" surge that will not
change the Fed's pledge to keep its benchmark overnight interest
rate near zero.
With long-term Treasury yields climbing again though in
Europe, the yield curve was steepening. The spread between
two-year and 10-year U.S. yields US2US10=TWEB , the most-keenly
monitored part of the yield curve, rose to 155 basis points, the
steepest since September 2015.
The 10-year inflation break-even rate hit 2.3%, indicating
inflation expectations US10YTIP=RR are now at their highest
since January 2014.
The reaction in commodity markets was a small dip in Brent
oil prices to $67.6 a barrel. Traders also pointed to rising
U.S. crude inventories and expectations of weaker demand in
Europe, where the coronavirus vaccine roll out is faltering.
Gold XAU= dipped 0.3% to $1,737 per ounce.

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Global assets http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
Rising U.S. Treasury yields https://tmsnrt.rs/3cNEpX5
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