U.S. economic data reports lift global stocks, euro

Reuters | Thu Sep 9, 2010 | 9:11pm IST

us-economy Stocks and the euro rose on Thursday after stronger-than-expected U.S. data on labor conditions and trade activity, raising hopes the tepid economic recovery would accelerate. The yen edged near to a 15-year high against the dollar as investors bet Japanese authorities are not yet ready to curb the currency’s strength. Crude prices rose and bonds fell. New claims for unemployment insurance fell more than expected last week to their lowest level in two months and the U.S. trade deficit narrowed more than forecast in July as exports shot to their highest level since August 2008, painting a rosier picture for economic growth.

"The news flow has been positive over the last few days compared to what was through most of August," said John Toohey, vice president of equity investments at USAA in San Antonio, Texas. "You put that together with the fact sentiment among investors had turned more bearish than it has been since early 2009, you are ripe for a rally." Fears of a double-dip recession have kept investors at bay and the stock market in a tight trading range for several months. The Dow Jones industrial average added 61.91 points, or 0.60 percent, to 10,448.92. The Standard & Poor’s 500 Index rose 9.49 points, or 0.86 percent, to 1,108.36. The Nasdaq Composite Index gained 17.27 points, or 0.77 percent, to 2,246.14. Japan’s Finance Minister Yoshihiko Noda said the ministry was conducting simulations on forex intervention, though the Japanese currency hardly budged as the perception remains that Tokyo is unlikely to intervene until the U.S. currency falls near 80 yen. Noda’s comments were also undermined as Bank of Japan Governor Masaaki Shirakawa said he did not talk about currencies and monetary policy at a government meeting.

"Comments from Japanese authorities indicated they are not in a hurry to intervene, so new (dollar) lows should be tested," Roberto Mialich, currency strategist at UniCredit in Milan, said. The dollar pared losses against the yen after the release of the U.S. data, but the yen remained near a 15-year high against the dollar. The dollar is down 9.9 percent against the Japanese currency this year, which is buoyant on global growth concerns. The euro eased 0.2 percent to 106.45 yen, hovering near a nine-year low. The single currency was up 0.2 percent against the dollar at $1.2750, helped by comments from European Central Bank Governing Council member Yves Mersch that the euro zone was on the brink of a sustainable recovery.

Illustrating the current dilemma, Deutsche Bank board member Juergen Fitschen said the risk of a credit crunch in the real economy has not abated as demand for loans rises, spurred by a rebound after the financial crisis. The U.S. Treasury will reopen the 30-year bond it originally sold in August by $13 billion, which is part of this week’s $67 billion in coupon-bearing supply.

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