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While you were sleeping Hope for central bank help

Friday 10th August 2012

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Wall Street held on to recent gains as data showing China's inflation and industrial production growth cooled in July fanned hopes that the central bank of the world's second-largest economy will act to accelerate the pace of expansion.

In late afternoon trading in New York, the Dow Jones Industrial Average was steady at 13,175.09, the Standard & Poor's 500 Index squeezed out a 0.07 percent gain and the Nasdaq Composite Index rose 0.20 percent.

In Europe, the Stoxx 600 Index ended the day with a 0.4 percent advance on the previous close.

"The markets have run up quite a bit for quite a while ... and the story is always the same -- the hope for stimulus from the ECB, from the Federal Reserve, from the Chinese -- from everywhere," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, told Reuters.

"From now until the end of August, I'm not saying every day should be up, but normally I think we're going to have a firmer tone for the market."

China's consumer prices increased 1.8 percent last month from a year earlier, according to National Bureau of Statistics data. That was down from a 2.2 percent rise in June and the lowest level in 30 months.

Growth in value-added industrial production eased to 9.2 percent from a year earlier in July, and was down from 9.5 percent in June, the National Bureau of Statistics said.

US jobless claims offered a bright note, unexpectedly falling by 6,000 to 361,000 in the week ended August 4, Labor Department figures showed.

A separate report indicated that US home prices increased by the most since 2006 in the second quarter, helping underpin a sense of cautious optimism that the battered real estate market remains on track slowly but surely for recovery.

"The turnaround in home prices feels pretty broad," Celia Chen, a housing economist at Moody's Analytics in West Chester, Pennsylvania, told Bloomberg. "There are still risks that home prices will dip a little more before they start appreciating with any consistency."

There is still plenty of concern about the euro zone's problem children. The yield on Spain's two-year note jumped 15 basis points to 4.02 percent, while that on the Italian two-year note rose six basis points to 3.26 percent.

"The market's keeping a close eye on Italy and Spain," David Schnautz, a New York-based fixed-income strategist at Commerzbank, told Bloomberg. "The momentum since the ECB meeting is running out of steam. Spanish bonds are under some pressure. The market gets nervous when it sees double-digit increases in two-year yields."

Highlighting the struggle in Greece with the austerity measures required to secure the next chunk of its international financial lifeline was the latest unemployment data. The jobless rate rose to a record 23.1 percent in May. More than half, or almost 55 percent, of those aged 15-24 don't have a job.

BusinessDesk.co.nz



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