BackGlobal shares, oil gain on US, European manufacturing data
World equity markets start third quarter on positive note; signs of stabilization in European manufacturing lift euro
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New York: Global equity markets and crude oil prices rose on Monday as investors snapped up riskier assets at the start of a new quarter after data showed US manufacturing expanded in June, while Japanese and European data pointed to stabilizing economies.
US stocks pared some initial gains that propelled the major indices more than 1% higher after the Institute for Supply Management said its index of national factory activity rose to 50.9 in June from 49 in May. That was a touch above the expected 50.5 level.
Earlier in Europe, business surveys showed the euro zone’s prolonged economic decline may have stabilized in June and even rebounded in some areas, while British manufacturing grew at its fastest pace in more than two years.
“People saw ISM was stronger and slightly higher than consensus and decided to run with it," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
Forrest said the reallocation of cash from bonds into stocks as the new quarter begins could be behind the strength the equity market showed even before the release of the US data.
US equities built on the strongest first half since 1998 as concerns eased further that the Federal Reserve would soon reduce its bond-buying policy aimed at spurring economic growth.
Gains this year have been enhanced the Fed’s policy, which helped push major US indexes to record highs before recent comments by Fed chairman Ben Bernanke sparked uncertainty over when the US central bank will start to reduce its support.
MSCI’s all-country world equity index rose 0.75% as it bounced back from its first quarterly loss since the same period of 2012.
The Dow Jones industrial average was up 71.35 points, or 0.48%, at 14,980.95. The Standard & Poor’s 500 Index was up 9.03 points, or 0.56%, at 1,615.31. The Nasdaq Composite Index was up 31.10 points, or 0.91%, at 3,434.35.
In Europe, the broad FTSEurofirst 300 of leading regional companies rose 0.99% to close at 1,163.58.
Investors brushed off signs of a slowdown in China, where the official purchasing managers’ index showed factory growth stalling last month. A similar private survey offered a bleaker picture and showed manufacturing activity tumbled to a nine-month low.
Crude oil rose amid a broad rally in commodities.
In London, Brent crude gained 84 cents a barrel to settle at $103.00. US crude rose $1.43 to settle at $97.99 a barrel. Some in the market questioned the day’s surge.
“Markets have been going back and forth, but it looks like a relief rally after everyone over-reacted to Bernanke’s comments," said Uri Landesman, president of Platinum Partners in New York.
Copper rose in a rebound from a low last week, helped by a weaker dollar. But concerns linger about the outlook for demand after the data on Chinese manufacturing.
Markets are sensitive to US data because it will shape the timetable for the Fed to taper its $85 billion a month in asset purchases, which have driven interest rates to record lows and supported stocks, bonds and commodities worldwide.
“The news out of Europe was the first tangible proof of improving economic activity in the periphery economies and indicates that the region may be finally starting to turn toward growth as the summer progresses," said Boris Schlossberg, managing director of FX strategy at BK Asset Management.
The dollar fell against most currencies, while the yen dropped to its lowest in nearly four weeks versus the greenback as the better-than-expected economic data from Europe and Japan lifted risk sentiment.
The euro was up 0.45% at $1.3065, recovering after a dip last week to $1.2983, its lowest since early June.
The dollar was up 0.52% at ¥99.64.
US treasuries prices erased most of the session’s losses after the ISM manufacturing index’s employment index slipped in June.
The benchmark 10-year US treasury note was up 2/32 in price to yield 2.4803%. Reuters
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