While you were sleeping: Sluggish data welcomed

Friday 31st May 2013

US economic data falling short of expectations bolstered hope that the Federal Reserve might see the need to support the world's largest economy a little longer than it has recently hinted.

The economy grew at a 2.4 percent annualised rate in the first quarter, according to the Commerce Department. That was down from an earlier estimate of a 2.5 percent pace of expansion in the period. Government spending tumbled at a 4.9 percent annual rate in the first three months of the year, while consumer spending increased at a 3.4 percent annual clip.

Separately, the National Association of Realtors' index of pending house sales increased 0.3 percent in April, short of expectations and down from the 1.5 percent climb in March. Even so, it was the highest reading since April 2010.

"The take away from today's statistics is that there's going to continue to be a bias to keep QE [quantitative easing] in place," Matthew Kaufler, fund manager at Federated Investors in Rochester New York, told Bloomberg News.

The dollar dropped to a three-week low versus the euro. The yen gained versus the greenback after Reuters reported that Japan's public pension fund may allow its investment in domestic stocks to grow, citing unnamed people familiar with the matter.

Shares of NV Energy soared, last up 23 percent, after MidAmerican Energy Holdings said it will pay US$5.6 billion for the Nevada utility.

Shares of Facebook gained, last up 5.9 percent, after broker upgrades. Jefferies & Co and BMO Capital upgraded the stock to buy and outperform, respectively, according to Reuters.

In late afternoon trading in New York, the Dow Jones Industrial Average rose 0.55 percent, while the Standard & Poor's 500 Index gained 0.70 percent and the Nasdaq Composite climbed 0.95 percent.

Europe's benchmark Stoxx 600 Index finished the session with a 0.4 percent increase from the previous close. The UK's FTSE 100 advanced 0.5 percent, France's CAC 40 rose 0.6 percent, while Germany's DAX climbed 0.8 percent.

The latest data showed an upswing in confidence in the euro zone. An index of executive and consumer sentiment advanced to 89.4 in May, from 88.6 in April, European Commission data showed.

On commodities markets, gold surged 1.5 percent, while copper ended up about 1 percent in London. Oil also rose.

"The falling dollar is the only explanation that makes sense for the rebound in oil prices," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, told Bloomberg.

BusinessDesk.co.nz

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