US stocks, dollar rise as central bank policies look like diverging

US stocks rose for the first time in 2014 on Tuesday. The S&P 500 climbed 0.6 percent after having fallen 1.2 percent over the first three trading days of the year.

The US dollar also rose on Tuesday after a report showed that the US trade deficit fell in November after exports rose 0.9 percent and imports fell 1.4 percent.

There were also positive data from the euro area on Tuesday. In Germany, retail sales rose 1.5 percent in November and unemployment fell by 15,000 in December.

For the euro area as a whole, inflation slowed to 0.8 percent in December from 0.9 percent in November.

The low inflation in the euro area means that the European Central Bank is likely to lean towards more stimulus even as the Federal Reserve is starting to remove monetary stimulus. Bloomberg has noted the split in the likely direction of monetary policy among the world's major central banks.

The united stimulus front of central banks is starting to splinter as 2014 dawns.

The Federal Reserve -- soon to be led by Janet Yellen, confirmed today by the Senate as the next chairman -- begins pulling back on its quantitative easing amid stronger U.S. growth, and the Bank of England is trying to cool its housing market. The European Central Bank and Bank of Japan lean toward more monetary action to fight weak inflation. The ECB and BOE both hold policy meetings this week.

The erosion of the mostly synchronized stimulus that supported the world economy for the past six years has investors anticipating a stronger U.S. dollar and weaker Treasuries...

“The world’s main central banks have very different things going on, which is an opportunity for investors,” said Scott Thiel, London-based head of the global bond team at BlackRock Inc., the world’s biggest money manager. “It’s very important to look at the economies close to inflection points on monetary policy.”