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While you were sleeping: Stocks resume advance

Friday 26th March 2010

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Equities advanced in both Europe and the US on renewed hopes for a bail-out package for Greece and fresh signs that the world’s biggest economy was powering ahead.

At midday, the Dow Jones Industrial Average rose 0.55% and the Standard & Poor’s 500 gained 0.36%. The Nasdaq Composite rose 0.57%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ rose 0.4% to 17.62.

Among the advancers were Qualcomm Inc, Best Buy Co and Citigroup. Both Qualcomm and Best Buy forecast higher profits. Citigroup surged after Bloomberg said the US government was preparing to sale its stake in the company.

First-quarter S&P 500 earnings reports, due in the coming weeks, are forecast to show year-over-year gains of 36.6%, according to estimates compiled by Thomson Reuters.

In Europe overnight, the Dow Jones Stoxx 600 rose 1% to 264.79.

Germany's DAX rose 1.56%, France's CAC 40 was up 1.28%, while Britain's FTSE 100 index ended 0.88% higher.

Investor appetite for risky assets such as equities rose, with the VDAX-NEW volatility index falling 2.7%. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the higher the market's desire to take risk.

Some of the biggest movers included Hochtief AG, Next Plc and Drax Group Plc.

Financial stocks were among the top gainers, with Stoxx 600’s banking index rising 1.9%. Standard Chartered , HSBC, Barclays, Lloyds, BNP Paribas, Societe Generale, Credit Agricole and Bank of Ireland rose 1.1 to 6.5%.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.08% to 82.05.

The euro fell against the dollar after European Central Bank President Jean-Claude Trichet said the euro region needed to take responsibility for its members and that possible International Monetary Fund aid for Greece was “very, very bad”.

The European currency fell 0.1% to US$1.3302 in mid-afternoon trading in New York after earlier gaining as much as 0.5%.

Trichet told France’s Public Senat television that Greece issued “false figures,” which was “unacceptable”.

Bill Gross, head of Pacific Management Co, told Bloomberg Radio that the almost three-decade bond market rally was nearing an end because of excessive borrowing by governments around the world.

“Bonds have seen their best days,” Gross said in a Bloomberg Radio interview today from Pimco’s headquarters in Newport Beach, California.

“We are focused more in spread space than in yield space. Durations should be shorter than index and you should be taking a little more risk in terms of spreads.”

The yield on the current seven-year note increased 7 basis points, or 0.07 percentage point, to 3.36% in early afternoon trading in New York, according to BGCantor Market Data.

At today’s seven-year note auction, investors bid for 2.61 times the amount on offer, the lowest since May. Indirect bidders, a class of investors that includes foreign central banks, purchased 41.9% of the notes, compared with an average of 54% over the past 10 auctions, Bloomberg reported.

The auction drew a yield of 3.374%, compared with the average forecast of 3.372% in a survey of eight of the Fed’s primary dealers.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.59% to 267.88.

U.S. crude for May delivery rose 50 cents US$81.11 a barrel by midday in New York. ICE London Brent for May rose 47 cents to US$80.09.

Spot gold was bid at US$1091.35 an ounce at 1456 GMT, against US$1086.50 late in New York on Wednesday. US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose US$2.90 to US$1091.70 an ounce.

The precious metal fell to a six-week low of US$1084.85 an ounce on Wednesday as the euro slid more than 1% versus the dollar.

US copper futures were little changed, as prices held to recent ranges. Copper for May delivery was up 0.10 cent at US$3.3465 per lb by 1423 GMT on the New York Mercantile Exchange's COMEX division.

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