Stocks and commodities up on Europe, Caterpillar
NEW YORK, Oct 25 — Global stocks hit a seven-week high yesterday and commodities rallied on optimism European leaders were moving closer to resolving the region’s debt crisis as strong earnings from Caterpillar boosted investor sentiment.
Chinese data showing a rebound in manufacturing eased fears of an abrupt slowdown in the world’s second-largest economy, sparking the biggest jump in copper prices in nearly three years.
Eurozone policymakers neared agreement over the weekend on bank recapitalization and on how to leverage their rescue fund to try to stop bond market contagion. But final decisions were deferred until a second summit on tomorrow.
Optimism that officials will come up with a broad agreement this week lifted the euro to a six-week high against the dollar, despite concerns about deep divisions over the extent of losses that private holders of Greek bonds would have to accept.
“Investors are pricing in the fact that the worst will be avoided with the conclusion of tomorrow’s EU summit,” said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
MSCI’s all-country world stock index rose 1.8 per cent, after hitting its highest since early September.
Some investors remained unconvinced that this week’s summit would fortify the bailout fund — the European Financial Stability Facility (EFSF) — enough to tackle the debt crisis.
The concerns sent German government bond prices higher, while the spread between the yield on the 10-year Italian BTP benchmark bond and the equivalent German Bund widened. Italy is under mounting pressure from European partners to introduce measures to stimulate growth and restore market confidence.
“All eyes are looking at tomorrow (for) possible answers. We are still not sure how the EFSF would work. This leaves a wide range of options open,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
US stocks ended higher. The Dow Jones industrial average rose 104.83 points, or 0.89 per cent, at 11,913.62. The Standard & Poor’s 500 Index was up 15.94 points, or 1.29 per cent, at 1,254.19. The Nasdaq Composite Index was up 61.98 points, or 2.35 per cent, at 2,699.44.
Caterpillar Inc gained 5 per cent after reporting a 44 per cent jump in quarterly profit on record revenues. Demand for its heavy equipment is seen as a gauge of global economic health.
European shares closed up 1.1 per cent, and emerging market shares rallied 3.6 per cent.
China’s vast manufacturing sector expanded moderately in October to snap three months of contraction, reflecting the resilience of robust domestic demand and rising expectations for metals demand.
Copper on the London Metal Exchange closed at US$7,635 (RM23,897) a tonne, up 6.9 per cent. Benchmark copper, nickel and tin all rallied more than 6 per cent.
Spot gold last traded at around US$1,653 an ounce.
Brent crude settled US$1.89 higher at US$111.45 a barrel. US crude ended up US$3.87 at US$91.27 a barrel.
The euro last traded 0.2 per cent higher at US$1.3926.
The dollar fell 0.3 per cent to 76.04 yen, trading close to a record low reached Friday and leaving traders on alert for possible official intervention in the Japanese currency to stem strength.
Finance Minister Jun Azumi said Japan will take decisive action on excessive and speculative foreign exchange moves. He said the dollar below 76 yen did not reflect economic fundamentals.
Gains on Wall Street weighed on safe-haven US Treasuries. Benchmark 10-year Treasury notes fell 4/32 in price for a yield of 2.23 per cent. — Reuters