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China data boosts stocks and oil outlook; US shares also rally on M&A activity, earnings
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New York: Stock markets around the world rose on Wednesday as strong China growth data and solid US company earnings boosted sentiment and concerns eased over the strength of Portugal’s largest listed lender.
Commodity prices were also supported by the China economic data, which pointed to improving demand, while gold rebounded off a two-day drop.
China’s economy expanded at a 7.5% annual pace in the second quarter, the statistics bureau said, just beating the 7.4% median forecast in a Reuters poll. The data confirmed the economy had stabilized after a shaky start to the year, though analysts said the pick-up was largely driven by government stimulus.
“There’s a lot of good news to go around today, but given all the worries there were about China, the data there is especially a positive," said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.
The MSCI International ACWI Price Index rose 0.4% on the day.
Equity prices have stalled recently, with many indexes at record or multi-year highs, as investors questioned whether fundamentals justified the levels. On Tuesday, shares dipped after US Federal Reserve chair Janet Yellen said some sectors of the US stock market had “substantially stretched valuations."
Merger activity in the US also boosted stocks, along with a round of positive earnings, including from tech bellwether Intel Corp., which rose 6.4% to $33.73 on better-than-expected results.
Time Warner Inc. jumped 18% after 21st Century Fox confirmed it had made an $80 billion takeover offer for the company, an offer that was turned down.
“The M&A activity and results really validate current levels, which Yellen had raised a red flag on," Colas said.
The Dow Jones industrial average rose 46.81 points or 0.27%, to 17,107.49, the S&P 500 gained 6.16 points or 0.31%, to 1,979.44 and the Nasdaq Composite added 19.83 points or 0.45%, to 4,436.22.
The US 10-year treasury note rose 2/32 in price to yield 2.5413%.
In Europe, the pan-European FTSEurofirst 300 equity index popped 1.2%, the biggest one-day advance since 29 April as concerns eased over the exposure of Portugal’s Banco Espirito Santo (BES) to the troubled companies of its founding family.
“There must be investors there counting that most of the impact is already priced in and it’s time to buy," said Fincor analyst Albino Oliveira.
Lisbon shares rose 2.7%, with Banco Espirito Santo shares up 17%.
US Dollar Rises
The US dollar index, which values the greenback against a basket of currencies, rose 0.2%, advancing for a second straight session and hitting its highest in a month. The gain came after Yellen said interest rates could rise sooner than expected if employment data improved.
The euro was down 0.3% at $1.3536 while the dollar was flat against the Japanese yen at ¥101.65.
One of the biggest movers in currencies was the New Zealand dollar, which dropped 0.6% to a low of $0.8718 after benign inflation data that could reduce pressure on the central bank to tighten policy.
In commodity news, US crude futures rose 1.3% to $101.21 after the China data, while Brent crude climbed above $106 a barrel. Brent hit a three-month low of $104.39 on Tuesday.
Gold rose 0.7% but held near a four-week low. It fell more than 3% over the first two sessions of this week. Silver rose 0.4% while copper fell 0.2%. Reuters
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