LONDON, Aug 24 — World stocks powered to a 10-month high today while the yen fell after firmer US and euro zone data and reassuring comments from the world’s key central bankers spurred buying of risky assets.
A survey three days ago showed sales of previously owned US homes jumped 7.2 per cent in July to mark the fastest pace in nearly two years. Monday’s data showing a bigger-than-expected rebound in euro zone industrial new orders also aided sentiment.
Bernanke and other central bankers said at the annual gathering in Jackson Hole on Friday the worst global recession in 70 years was nearing a close, although they warned it would be a long, slow climb back to normal growth.
They also said it was too soon to withdraw trillions of dollars in government and central bank support, which reassured investors that the cost of borrowing is not rising just yet.
“There was a concern about China, but that dissipated and US data, especially housing, was upbeat, and Bernanke was encouraging. Risk aversion is diminishing,” said Philip Lawlor, strategist at Nomura. MSCI world equity index rose 0.7 per cent to reach levels not seen since October. The FTSEurofirst 300 index rose half a per cent.
US stock futures were up 0.2 per cent, pointing to a firmer open on Wall Street later.
European credit default swap indexes fell sharply. The Markit iTraxx Crossover index, made up of 44 mostly “junk”-related credits, fell 21.75 points to 581.25 bps.
Tokyo stocks jumped 3.4 per cent, their biggest one-day gain in 3-1/2 months. However, trading was thin, with turnover volume on the Tokyo stock exchange’s first section at its lowest level since July 28.
Investors were also hesitant about taking heavy positions before the Aug. 30 general election where many expect the opposition Democratic Party to win.
Emerging stocks rose 1.75 per cent. Shanghai stocks rose 1.1 per cent.
The Shanghai index posted its third weekly loss last week on concerns that the country’s banking regulator may tighten capital rules. Jitters that the pace of growth might be slowing or authorities might tighten the relatively loose monetary policy also weighed on sentiment.
“China has been at the forefront of global recovery hopes... We believe China will likely continue to help global demand by running a much smaller trade deficit (in real terms) next year,” Goldman Sachs said in a note to clients.
The bank estimates that China alone is expected to contribute 1.7 percentage point of the 4 per cent global real GDP growth that we forecast currently in 2010.
“So any slight weakness in the China story will have important ramifications for the rest of the world and understandably raise concerns, as we have seen in recent weeks,” it said.
US crude oil rose 0.1 per cent to US$73.98 (RM260) a barrel.
The September bund futures fell 10 ticks.
The dollar rose 0.15 per cent against a basket of major currencies. Against the yen it rose 0.4 per cent to 94.77. — Reuters
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