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World stocks rise, but set for sharp monthly fall

World stocks rise, but set for sharp monthly fall
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First Published: Wed, Aug 31 2011. 02 57 PM IST
Updated: Wed, Aug 31 2011. 02 57 PM IST
London: World stocks rose for the fourth session in a row on Wednesday on hopes the US Federal Reserve will ride to the economy’s rescue with another stimulus package, though global shares were still set to post their biggest monthly drop in 15 months.
Copper prices also rose while the dollar slipped against the Swiss franc and the yen.
Gold, bolstered during August by safe-haven buying, eased 0.1%. However, it was poised to post its biggest monthly rise since November 2009.
Yields on 10-year US Treasuries and German Bunds also fell sharply this month, with the Treasury yields down more than 21% — heading to their biggest monthly%age drop since December 2008.
Tuesday’s slump in US consumer confidence to its lowest in two years, along with Fed minutes showing policymakers discussed a range of unusual tools they could use to help the economy, further bolstered expectations that the US central bank is ready to act.
The Fed’s decision to hold a two-day meeting in September instead of a one-day session has already helped stabilise financial markets after a steep sell-off earlier in August on concerns over slowing global growth and the euro zone debt crisis.
“Although the release of the FOMC meeting minutes offered little in the way of consensus as to precisely what the central bank will do next, it does still leave the door open for further action so this may well help keep the general sentiment upbeat,” said Cameron Peacock, market analyst at IG Markets.
The pan-European FTSEurofirst 300 index of leading shares climbed 1.2%, though it was still down 12% in August and set for its biggest monthly fall since October 2008 after the collapse of Lehman Brothers.
World equities measured by the MSCI All-Country World Index advanced 0.6%. The benchmark is down 8.2% this month, heading for its worst monthly%age drop since May last year.
In Asia, Japan’s Nikkei average ended flat and was down 8.9% in August, its biggest one month decline in 15 months.
Dollar dips
Expectations of further stimulus from the US weighed on the dollar, which was down 0.9% at 0.8126 francs and 0.1% at ¥76.58 on Wednesday.
“In the run up to the September FOMC, we’re probably going to have a bit more chatter about QE3...which is likely to keep the dollar weak,” said Andrew Robinson, FX analyst for Saxo Capital Markets in Singapore.
The US currency was down 1.2% in August versus the yen, despite Tokyo’s efforts to weaken its currency through intervention. The greenback is down 5.6% this year against the yen, which has held its safe-haven appeal.
The euro was down 0.1% at $1.4435, though the single currency is up 7.9% against the dollar this year, largely helped by Asian investors’ moves to diversify their assets.
Copper added 0.7%, up for the sixth day in a row, while Brent crude steadied to trade just below $114 a barrel.
Yields on 10-year Treasuries were up 1 basis point at 2.1899% after falling 60 basis points in August. Benchmark Bund yields have dropped nearly 40% over the same period.
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First Published: Wed, Aug 31 2011. 02 57 PM IST
More Topics: Global Markets | London | Crude | Gold | Dollar |