GLOBAL MARKETS-Stocks higher, safe-haven U.S. debt slides

Thu Jan 24, 2013 3:57pm GMT

Quotes

   

* U.S. jobless claims drop supports stocks, weighs on bonds

* China, Europe PMIs positive for sentiment

* Apple disappoints, but Netflix jumps after results

* Yen resumes months-long weakening against dollar, euro

By Ellen Freilich

NEW YORK, Jan 24 (Reuters) - World stock markets rose on Thursday and U.S. stocks extended a six-day rally, sailing through the headwind of a revenue miss from Apple, while the yen resumed its drop and oil prices gained.

The broad S&P 500 and the Dow Jones industrials stock market indices both advanced. The Nasdaq composite index was lower, but the entire loss - and more - was due to the drag from a 9.8 percent drop in the value of Apple.

MSCI's world equity index rose 0.28 percent and Europe's FTSE Eurofirst 300 index gained 0.25 percent.

Business surveys released on Thursday showed growth in Chinese manufacturing accelerated to a two-year high in January and a buoyant Germany was leading the euro zone toward recovery. But they also revealed France was sliding back into recession.

The Dow Jones industrial average was up 79.69 points, or 0.58 percent, at 13,859.02. The Standard & Poor's 500 Index was up 5.33 points, or 0.36 percent, at 1,500.14. The Nasdaq Composite Index was down 5.09 points, or 0.16 percent, at 3,148.58.

The stock market's continued strength and news that the number of Americans filing new claims for jobless benefits hit a five-year low last week weighed on safe-haven U.S. debt.

The benchmark 10-year Treasury note, up 4/32 in price before the jobless claims report, subsequently fell 10/32, yielding 1.8631 percent, as investors moved funds into stocks.

"It's a reach for return in the equities market," said Todd Colvin, senior vice president of global institutional sales with R.J. O'Brien & Associates in Chicago. "Risk takers are being rewarded so far this year."

For the euro zone as whole, January's flash euro zone purchasing managers index pointed to more weakness ahead for a region already mired in recession. But it also pointed to improvement later in the year.

"The main story is that the pace of recession is clearly easing," said Marco Valli, chief euro zone economist at UniCredit.

The data showed the contrasting fortunes of Germany and France, with German activity at its strongest levels in a year and the French PMI at its lowest level since March 2009.

"The current gap between the German and French composite PMI indices is unprecedented," said Ken Wattret, chief euro zone economist at BNP Paribas.

That gap helped lift German bond prices to a three-week high, a move supported by Spanish figures showing another record high unemployment rate and a rising tide of bad bank loans.

French bonds were seemingly unaffected by the data, with the 10-year bond yield 2 basis points lower on the day at 2.11 percent.

CHINA TURNS

Investors in British stocks shrugged off worries about Europe and focused on the better Chinese data and its implications for mining companies. That pushed London's FTSE 100 up 1.08 percent.

China's HSBC flash purchasing managers' index rose to 51.9 in January, a two-year high, signaling a rebound in manufacturing and confirming a recovery in growth in the world's second-largest economy was on track.

The growing confidence in the pace of China's economic recovery helped keep Brent crude oil above $113 a barrel and copper at $8,099 a tonne, while gold slipped to $1,670.14 an ounce.

YEN SLIDES

In the currency markets, the yen posted steep losses across the board after three days of gains, hurt by Japan's record trade deficit and comments from a Japanese economic official saying the government has no problem with the dollar hitting 100 yen.

The euro, meanwhile, rose against the dollar after economic data from Germany indicated the worst of the euro zone debt crisis may have passed. But the yen drew the most attention.

Traders cited reports quoting Deputy Economy Minister Yasutoshi Nishimura as saying the yen's decline is not over and a dollar/yen level of 100 would not be a concern.

"(Nishimura) represents another official voice favoring further yen weakness and the remarks probably supported the latest bounce in dollar/yen, which began overnight," said Bob Lynch, chief currency strategist at HSBC in New York.

The dollar was last up 1.4 percent at 89.84 yen, rallying from a one-week low of 88.06 yen hit the previous day.

The yen's weakness became further entrenched after Prime Minister Shinzo Abe said he expected the Bank of Japan to achieve its 2 percent inflation goal as soon as possible.

The yen rebounded earlier this week after the Bank of Japan disappointed investors who were expecting an immediate increase in its asset-purchasing program. Still, the BoJ delivered its most aggressive policy easing yet to snap the economy out of years of stagnation.

The euro was up 0.3 percent against the dollar at $1.3355, not far from an 11-month high hit on Jan. 14. The euro was up 1.6 percent against the yen at 119.92 yen.

Analysts said an influential German Ifo survey due on Friday, along with an announcement on bank plans to repay loans taken from the European Central Bank a year ago, would sway the euro in the coming days.