Monday 17:30 GMT. US stocks staged a solid rally and their European counterparts reached fresh seven-year highs as the dollar retreated ahead of a crucial meeting of the Federal Reserve's policy-setting Open Market Committee.
By midday in New York, the S&P 500 equity index was up 1 per cent at 2,073, recouping some of the 3 per cent loss it had incurred since setting a record closing high on the first session of the month.
Across the Atlantic, the pan-European FTSE Eurofirst 300 rose 1 per cent to its highest finish since late 2007 as the European Central Bank's quantitative easing programme entered its second week.
In Frankfurt, the Xetra Dax index — which, unlike most of its peers, factors in returns from dividends — stood out as it leapt 2.2 per cent to break above the 12,000 level for the first time.
Those gains came as the dollar index, a measure of the US currency against a weighted basket of rivals, fell 0.7 per cent from a 12-year high. The euro rallied 0.9 per cent against the dollar to $ 1.0583.
The dollar index has risen more than 10 per cent since the start of the year — and 25 per cent since last May — as persistent signs of improvement in the US labour market have fuelled expectations that the Federal Reserve would raise interest rates, possibly by the summer.
Many expect the Fed to use Wednesday's policy statement to further pave the way for such a move by dropping its signal that it can be "patient" before starting to normalise monetary policy.
"The semi-annual testimony from Fed chairwoman Janet Yellen last month has fully prepared the market for a change in policy communication," said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
"By removing the 'patient' signal it will allow the Fed to set monetary policy with more flexibility in response to incoming economic data."
Joseph LaVorgna, chief US economist at Deutsche Bank, said there were at least three ways the Fed could blunt any negative market reaction to the removal of the "patient" phrase.
"One, the FOMC can tone down its near-term assessment of economic activity," he said. "With the exception of the labour market data, many other economic [data] series have been soft.
"Two, chairwoman Yellen can stress in the post-meeting press conference that the removal of 'patient' does not mean the Fed will necessarily hike rates in two meetings. Three, the median 2015 Fed funds forecast is likely to come down."
Mr LaVorgna said the strength of the dollar — which many worry could provide a further headwind to US growth — would not be mentioned explicitly in the FOMC statement.
"But Ms Yellen will surely discuss recent foreign exchange developments in the press conference, because she will likely be asked by the financial press in the question-and-answer session," he said.
Meanwhile, the latest US economic releases prompted expectations in some quarters that the Fed's tone might be more dovish than anticipated.
"Today's US reports are documenting a hefty first-quarter petro-hit to factories, via a further March decline in the Empire State [New York business conditions] index — with weakness in all but the employment components — and a surprisingly tame 0.1 per cent industrial production rise in February after a big downward January revision," said Michael Englund at Action Economics.
"We now expect a flat industrial production figure for the first quarter that will mark the weakest factory-sector quarter of this expansion."
The yield on the 10-year US government bond was down 4 basis points at 2.08 per cent and the two-year was 1bp lower at 0.65 per cent.
In the eurozone, 10-year sovereign yields were flat to a shade higher, although demand was higher further out along the curve.
"The scarcity/shortage trade continues to help flatten the eurozone yield curve with 30-year bonds still leading the way," said Divyang Shah, global strategist at IFR Markets.
"What is interesting is that last week much of this was as a result of negative yields extending further down the core/semi-core curve but with this partially reversed we are simply seeing a continuation of a strong trade."
There was further weakness for oil prices following last week's steep decline. Brent was down 2.1 per cent at $ 53.53 a barrel, although it was off a low of $ 52.50, while US West Texas Intermediate was 2.8 per cent lower at $ 43.59.
Neither did the weaker tone of the dollar provide much help for gold, as the metal fell another $ 4 to $ 1,154 an ounce. Copper slipped 0.3 per cent in London to $ 5,835 a tonne following news of another increase in LME inventories.
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