New York: Global stocks rose on Thursday and the euro strengthened, backed by upbeat corporate results, better-than-expected US housing data, and an improvement in European manufacturing and services activity.
Expectations before the release of European banks’ stress test results appeared to show an easing of concerns as the region’s bank stocks ranked among the best performers.
The increase in investors’ risk appetite prompted some selling of government bonds, while crude oil gained from a combination of improving data and a weaker US dollar. Gold prices rose modestly, briefly edging back above $1,200.
US existing home sales fell less sharply than expected in June. However the supply of unsold homes rose to the highest amount in almost a year, the National Association of Realtors said.
“Home sales data was great. On an absolute basis, it’s (bad), but, man, it is in the right direction and certainly crunched consensus, and that is great news,” said Burt White, managing director and chief investment officer at LPL Financial in Boston.
“You’ve got a bunch of great earnings reports, revenues are hanging in there pretty well, and other than the Bernanke bummer yesterday, the mood is definitely looking up,” he said
White was referring to Federal Reserve Chairman Ben Bernanke’s comment before the US Congress on Wednesday, describing the economic outlook as “unusually uncertain.”
A gloomy report detailing a bigger-than-expected increase in new US weekly jobless claims and a drop in a private research group’s index of leading US economic indicators were overshadowed.
In midday trade, the Dow Jones industrial average rose 201.47 points, or 1.99 percent, to 10,322.00. The Standard & Poor’s 500 Index gained 22.89 points, or 2.14 percent, to 1,092.48. The Nasdaq Composite Index climbed 50.69 points, or 2.32 percent, to 2,238.02.
Earnings of UPS, the world’s largest package delivery company, soared 90% in the second quarter to $845 million. UPS shares shot up 5.95% to $63.58.
Caterpillar, the world’s largest maker of construction and mining equipment, reported second-quarter profit of $707 million, or $1.09 a share, exceeding analysts’ expectations. Caterpillar shares rose 1.48% to $67.86.
While Caterpillar raised its full-year outlook, citing sales growth in emerging market mining and energy companies, the bellwether company and Dow component cited “significant economic concerns,” including the risk of a double-dip recession in Europe and the United States.
The MSCI world equity index gained 1.81% and the Thomson Reuters global stock index rose 1.85%. Tokyo’s Nikkei fell for a fifth day, off 0.6%.
European bank shares rally
In Europe, the pan-European FTSEurofirst 300 index of top shares rose 2.11% to end at 1,039.35.
European banks’ shares advanced, with the sector focused on the outcome of stress tests on how 91 banks would cope with another economic slump and losses on government debt in the wake of the euro-zone sovereign debt crisis.
Shares of Barclays, HSBC, Societe Generale and Deutsche Bank were up 2.66% to 5.08%.
Major listed lenders are expected to pass, while the tests may show the biggest problems lie with smaller, mainly unlisted players like Germany’s Landesbanks and Spain’s cajas.
“There is hope that the stress test will take away a lot of uncertainty surrounding European banks, but you have to take into account that the ECB would not publish these results if it would be a failure overall,” said Koen de Leus, an economist at KBC Securities.
Dollar wilts on more easing hints
The dollar and US Treasury bond yields came under pressure on the prospect of further US monetary easing.
Bernanke’s said in his testimony the Fed stood ready to ease monetary policy further if the budding US economic recovery withers.
The US dollar index fell 1% against a basket of major trading-partner currencies to 82.572.
The euro rose 1.26% to $1.2902 after a survey showed the euro zone’s private sector surged in July.
European purchasing managers’ indexes showed private- sector business activity accelerated in July, surprising economists who had expected a slowdown, and indicating third-quarter euro-zone growth of around 0.6% to 0.7%, analysts said.
But the greenback clawed back ground against the yen after the housing data, trading nearly flat, off just 0.02% to 87.04.
Two-year US Treasury note yields briefly matched a record low of 0.556% hit the previous day, before rising back to 0.581%. The benchmark 10-year Treasury note fell 12/32 of a point in price, pushing the yield up to 2.93%.
In Europe, Bund futures slid 22 ticks to 128.69.
US light sweet crude oil futures rose $2.26, or nearly 3%, to $78.82 per barrel.
Spot gold prices rose $9.20 to $1,194.70 an ounce.