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A woman uses her smart phone while pedestrians walk past an electronic stock board showing a figure of the Nikkei Stock Average outside a securities firm in Tokyo, Japan, on Friday, Jan. 12, 2018. Japanese stocks declined after the yen remained stronger against the dollar and a technical indicator signaled the recent run-up to the highest level in 26 years was excessive.

(bloomberg)

(Bloomberg) -- U.S. stocks extended a global rally as equities rebounded from the worst of this month’s correction and the dollar slumped toward a three-year low.

The S&P 500 climbed for a fifth consecutive day, topping the 2,700 level as the Dow Jones Industrial average rose past 25,000 following gains in Europe and Asia. The yield on 10-year Treasuries held near 2.9 percent. The yen ascended to a 15-month high, while South Africa’s rand traded at its strongest level in almost three years after President Jacob Zuma resigned.

Stock investors brushed off a report on U.S. wholesale prices that underscored signs of stronger inflation even as a growing number of economists now expect the Federal Reserve to step up the pace of its interest-rate increases this year. A report yesterday showing faster consumer-price increases gave rise to debate on the breakdown in the greenback’s correlation to interest rates, as currency investors focused instead on the U.S.’s twin deficits.

Stocks remain cheap relative to bonds and won’t be affected by higher long-term interest rates as long as the 10-year Treasury yield stays below 4 percent, according to Gina Martin Adams and Peter Chung, equity strategists at Bloomberg Intelligence.

Japan’s Finance Minister Taro Aso’s comments that the yen’s gain isn’t abrupt enough to require intervention supported the Japanese currency’s rally. Hong Kong equities sealed their best three-day run in more than two years in shortened trading ahead of the Lunar New Year holiday. China, South Korea, Taiwan, Vietnam markets are closed Thursday.

Terminal users can read more in our markets blog.

Here are some important things to watch out for this week:

  • A handful of European Central Bank officials are due to speak Thursday and Friday.
  • Earnings season continues in full swing.
  • Lunar New Year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.

These are the main moves in markets:

Stocks

  • The S&P 500 rose 0.6 percent as of 9:56 a.m. in New York
  • The Stoxx Europe 600 Index climbed 0.7 percent.
  • Germany’s DAX Index gained 0.3 percent.
  • The MSCI All-Country World Index advanced 1 percent.

Currencies

  • The Bloomberg Dollar Spot Index declined 0.3 percent to approach a three-year low.
  • The euro gained 0.3 percent to $1.2487, reaching the strongest in two weeks.
  • The Japanese yen climbed 0.6 percent to 106.38 per dollar.
  • South Africa’s rand advanced 0.8 percent to 11.6291 per dollar.

Bonds

  • The yield on 10-year Treasuries was little changed at 2.9 percent, the highest in more than four years.
  • Germany’s 10-year yield rose one basis point to 0.76 percent, the highest in more than two years.

Commodities

  • West Texas Intermediate crude fell 0.5 percent to $60.31 a barrel.
  • Gold increased 0.2 percent to $1,353.08 an ounce, a three-week high.
  • Copper fell 0.2 percent to $3.229 a pound.

--With assistance from Adam Haigh Nancy Moran Natasha Doff and Todd White

To contact the reporter on this story: Brendan Walsh in Austin at bwalsh8@bloomberg.net.

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Jeremy Herron at jherron8@bloomberg.net.

©2018 Bloomberg L.P.

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