Global stocks gain on hopes of policy easing
NEW YORK |
NEW YORK (Reuters) - Global shares rose and the euro rebounded on Tuesday on growing expectations that major central banks will act to bolster the world economy after weak manufacturing data earlier this week highlighted the drag on growth from the euro zone debt crisis.
The euro climbed above $1.26 (0.803 pence) while U.S. and European equity markets rallied in thin trade as investors positioned for an expected rate cut by the European Central Bank when its policymakers meet on Thursday.
U.S. markets were to close early on Tuesday ahead of the Independence Day holiday on Wednesday, when they remain shut. Investors expect the ECB and Bank of England, which also meets on Thursday, to enact further measures to combat slow growth.
"There is nothing specific, an early fixing and positioning ahead of the ECB on Thursday," said Kathy Lien, managing director at BK Asset Management in New York, referring to the euro's rebound.
European shares closed at a two-month high and U.S. stocks rose for a third day as investors concluded that policymakers aim to shore up financial markets and the economy, spurred by last week's renewed efforts to tackle the euro zone debt crisis.
The Dow Jones industrial average closed up 72.43 points, or 0.56 percent, at 12,943.82. The Standard & Poor's 500 Index gained 8.51 points, or 0.62 percent, at 1,374.02. The Nasdaq Composite Index climbed 24.85 points, or 0.84 percent, at 2,976.08.
In Europe, the FTSEurofirst 300 index rose 1 percent to 1,046.11, its highest close since May 1.
The Euro STOXX 50 index rose 1.2 percent to 2,320.43 points, marking its highest close since April 27.
Analysts expect the ECB to cut its main refinancing rate by 25 basis points to 0.75 percent, and it may take more "non-standard" measures - such as reactivating its own bond-buying program or offering banks fresh liquidity.
Worldwide manufacturing data on Monday renewed fears the world economy could tip into recession and raised expectations the U.S. Federal Reserve will embark on another round of asset purchases, dubbed QE3, in an effort to stimulate growth.
The Bank also is widely expected to restart its own quantitative-easing program, approving 50 billion pounds or more of gilt purchases over three months.
The prospect of further central bank action lifted the price of gold and other commodities, including copper and oil. Crude jumped above $100 a barrel for the first time in three weeks as tension over Iran increased concerns about threats to supply.
"If the ECB offers loud support this Thursday with a rate cut and a signal of more to follow in the face of lower growth and inflation, there may be enough fuel for a summer rally in stock markets," said Bill O'Neill, EMEA chief investment officer for Merrill Lynch Wealth Management.
Data on Tuesday showed new orders for U.S. factory goods rose more than expected in May, although the previous day's data from June suggested U.S. manufacturers are vulnerable to Europe's festering debt crisis.
MSCI's all-country world equity index rose 1.0 percent to 316.54, while its emerging markets index was up 1.8 percent at 958.74.
U.S. Treasury debt prices eased as investors booked profits from Monday's gains on the surprisingly weak June report on U.S. manufacturing.
A similar measure of factory activity in the euro area also held steady at its lowest level since June 2009, while joblessness across the region rose to a record high in May.
The benchmark 10-year U.S. Treasury note was down 12/32 in price to yield 1.626 percent.
Many market players believe a weak U.S. jobs report on Friday could push the Fed into a third bout of quantitative easing - the policy of creating money to fund asset purchases that has lifted riskier assets such as shares and commodities in the past.
The dollar fell against a basket of major trading-partner currencies, with the U.S. dollar index down 0.09 percent at 81.796. The euro was up 0.17 percent at $1.2607.
Crude oil rose.
Brent crude was up $3.26 a barrel to $100.60 a barrel. U.S. crude rose $3.66 to $87.41 a barrel.
Spot gold prices rose $24.22 to $1,619.90 an ounce.
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