NEW YORK, Sept 18 — A measure of global stocks reached an 11-month high yesterday as economic reports supported themes of recovery, pushing currency investors seeking riskier trades out of US dollars.
But US shares edged lower as some disappointing corporate profits reined in enthusiasm over an economy still seen as vulnerable to rising unemployment.
Shares globally are flirting with their highest levels since the September 2008 collapse of investment bank Lehman Brothers, illustrating that investors believe the worst of the credit crisis and US recession has passed.
US government and industry data showed mixed signs of strength, giving rise to hopes that the nation’s employment outlook may stabilise after the loss of 6.9 million jobs during the recession. The Standard & Poor’s 500 Index has already rallied 58 per cent since March on such confidence, however, leading investors to turn more cautious.
A steep drop in profit from package shipping giant FedEx Corp also helped dampen the rally that dominated trading in Asia and Europe.
FedEx said it saw growing signs of stability in the “modestly improving global economy.”
“The economy is clearly on the mend, but it’s not a straight line,” said David Katz, chief investment officer at Matrix Asset Advisors in New York.
Stocks initially rose after the United States said the number of workers filing new claims for jobless benefits unexpectedly fell last week, while starts on new homes increased to their highest levels since November. These figures supported a view from Federal Reserve Chairman Ben Bernanke on Tuesday that the recession was likely over, even if the economy is not capable of more than sluggish growth.
The Federal Reserve Bank of Philadelphia said business activity in its region jumped to its highest since June 2007.
European shares reached their highest since early October for a second straight day, boosted by energy and financial stocks that would benefit from economies on the mend. The FTSEurofirst 300 index of top European shares closed higher by 0.51 per cent, at 1,011.26.
The broader MSCI world equity index rose 0.4 per cent to 290.88, a level also not seen since October, bringing its gain this year to almost 28 per cent.
US indexes shed early gains, with the Dow Jones industrial average down 0.08 per cent to 9,783.92. The Standard & Poor’s 500 Index declined 0.31 per cent to 1,065.49, and the Nasdaq Composite Index fell 0.15 per cent, to 2,080.90.
Shares of FedEx declined 2.2 per cent to US$76.46. In Europe, Standard Chartered, HSBC, Royal Bank of Scotland, BNP Paribas, Societe Generale and Credit Agricole were among financial leading gains, up between 0.5 and 3.8 per cent.
US government debt trading signalled investors were sceptical of the depth of an economic rebound.
The benchmark US 10-year Treasury note yield declined to 3.39 per cent from 3.48 per cent late Wednesday as investors discounted prospects for faster growth, which would quicken inflation and erode the value of fixed-rate debt.
The dollar declined, but recuperated against a basket of currencies after hitting a one-year low against the euro in earlier trading. The ICE Futures dollar index, which hit a one-year low of 76.010 earlier yesterday, traded at 76.224, down just 0.02 per cent from Wednesday.
The euro gained 0.2 per cent to US$1.4736 after reaching its highest since mid-September 2008.
The US currency has struggled as investors anticipating a recovery sought other currencies that would maximise profits.
“The trend of dollar selling is getting a little tired,” said Vassili Serebriakov, a strategist at Wells Fargo in New York, “but the market is still optimistic on the recovery.”
In Asia, an upgrade in Japan’s view on the economy, upbeat Chinese data and bullish comments from a senior Beijing government economist prompted investors to buy riskier assets.
Chen Dongqi, China’s senior government economist, said the country’s economy may regain double-digit annual growth in the fourth quarter of this year, potentially bringing monetary policy tightening closer.
Japan’s Nikkei stock average rose 1.7 per cent to 10,443.80, buoyed by exporting companies, after upbeat US economic data this week boosted hopes of rising demand. — Reuters
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