World stocks rebound, Treasury yields retreat after Fed, BoE decisions

By Chibuike Oguh

NEW YORK, Sept 17 (Reuters) - Global shares rose and Treasury yields fell on Thursday following the US Federal Reserve's interest-rate increase and what is expected to be a similar move by the Bank of Japan on Friday, as the world's central banks confront rising inflation.

Stocks fell on Wednesday following the Fed's stance, which was more hawkish than expected, and Chair Kevin Warsh's press conference, though much of that move was being unwound on Thursday, supporting equities, said James St. Aubin, chief investment officer at Ocean Park Asset Management.

"The big kicker from the equity-market perspective is that the hawkish tone was a bit more than what they were expecting and now we are settling in and investors are starting to say, 'well, maybe that was more talk than anything'. If you think about the backdrop from a fundamental perspective, it's still very strong and that's providing the overriding sense of optimism right now," St. Aubin said.

The Bank of England decided to leave interest rates unchanged, but signaled further policy tightening could be needed as higher oil prices add to inflation pressures. The Bank of Japan meets on Friday, when it is widely expected to lift interest rates.

On Wall Street, all three major indexes finished higher, breaking a three-session losing streak.

Technology, consumer discretionary and utilities stocks led gains, while consumer staples and financials lagged. The Dow Jones Industrial Average rose 0.61%, the S&P 500 rose 1.1%, and the Nasdaq Composite rose 1.7%. European shares gained nearly 1%.

MSCI's gauge of stocks across the globe rose 0.84% and was poised to snap three straight sessions of losses.

Bond yields pulled back from recent highs. The yield on benchmark US 10-year notes fell 6.55 basis points to 4.939%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Fed, fell 5.65 basis points to 4.671%.

DOLLAR EASES

The Fed's unanimous quarter-point rate increase on Wednesday was accompanied by its closely watched "dot plot", which signaled one additional rate hike this year.

The dollar took a breather against major peers after hitting a seven-week high in currency markets as US Treasury yields retreated following Wednesday's rise.

The euro was up 0.11% against the dollar at $1.14765 while the Japanese yen strengthened 0.22% against the greenback to 155.97 per dollar.

Sterling fell 0.18% to $1.3355 after the BoE decision, its lowest level in seven weeks against the dollar.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.03%.

OIL SLIPS

Brent crude futures dropped nearly 1% to settle at $104.82 a barrel overnight following reports Saudi Arabia was offering crude cargoes through Oman.

That helped ease some of the concerns about Middle East supply disruption, following a recent escalation of the seven-month war after attacks by Iran-backed Houthi fighters on Saudi cities. [O/R]

Spot gold rose 1.89% to $4,342.63 an ounce.

(Reporting by Chibuike Oguh in New York; Editing by Nia Williams, David Gaffen and Sanjeev Miglani)