While you were sleeping: Chinese bolster stocks

Friday 11th June 2010

Stocks in the US and Europe rose as China's confirmation of strong export data relieved recovery concerns and helped lift the euro.

China said exports jumped almost 50% in May from a year ago, reassuring investors about the global economy in the face of the euro-zone debt crisis.

"The data shows that there's enough worldwide demand for Chinese products to allow it to remain the engine of economic growth," Jim Awad, managing director of Zephyr Management in New York, told Reuters.

In late trading, the Dow Jones Industrial Average jumped 2.38%, the Standard & Poor’s 500 Index gained 2.57% and the Nasdaq Composite advanced 2.37%.

Energy shares gave one of the biggest boosts to the market, with the S&P energy sector up 3.7%, making it the top percentage gainer among S&P sectors.

Among the most active stocks on Wall Street were Caterpillar, Alcoa, Bank of America, Citigroup and Exxon Mobil.

The Chicago Board Options Exchange Volatility Index, or VIX dropped 7.77% to 31.11.

The Stoxx Europe 600 Index advanced 1.6% to 248.46.

European Central Bank President Jean-Claude Trichet said interest rates in the 16-nation euro region were “appropriate,” indicating he saw no immediate need to cut borrowing costs any time soon. He made the comments at a press conference in Frankfurt today after the ECB left its benchmark rate at a record low of 1%.

Before the ECB's announcement, euro Libor was fixed at 0.65438% in London.

New York University economist Nouriel Roubini overnight said the ECB should cut its key rate to zero and expand its bond purchases to help offset austerity measures being taken by a number of European governments.

Separately, Germany’s highest constitutional court rejected an attempt by a lawmaker who sought an emergency order blocking the nation from participating in the euro-area rescue fund.

The Bank of England kept its bond-stimulus program in place and left its benchmark interest rate at a record low to aid the economy as Prime Minister David Cameron prepares the biggest budget cuts since at least the early 1980s. He has said the country would need to endure years of spending limits.

The FTSE 100 gained 0.92%, France’s CAC 40 rose 2.03% and Germany’s DAX climbed 1.20%.

Among the most active stocks in Europe were BHP Billiton, Rio Tinto and Daimler. Mining shares rose after an Australian newspaper said the Rudd government might rework its new super resources tax as early as today.

US shares of oil company BP rebounded more than 10% in early trade, a day after plunging nearly 16% on mounting fears about how the company would cope with the massive costs of the oil spill in the Gulf of Mexico.

The company's London shares were down 6.1% to 367.7 pence, hitting their lowest level since 1997 as they caught up to the losses in the United States that occurred after the UK markets closed on Wednesday.

Several analysts said the selloff in BP was not justified because the company still had ample cash reserves to cover the clean-up costs of the spill, but that the political pressures had created uncertainty in the markets.

"It's tough to make price predictions on the stock, but I think the downside risks are outweighed by the near-term upside potential," Mike Breard, analyst with Hodges Capital Management in Dallas, told Reuters.

U.S. Treasuries extended losses after the U.S. sold US$13 billion of 30-year bonds.

The 10-year note’s yield increased 13 basis points, or 0.13 percentage point, to 3.31% at 1.49pm in New York, according to BGCantor Market Data.

At today’s auction, the 30-year bonds drew a yield of 4.182%, the lowest since the sale in October, when the yield was 4.009%. The average forecast in a Bloomberg News survey of 9 of the Federal Reserve’s 18 primary dealers was 4.206%.

The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.87, compared with 2.60 in May.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.90% to 87.11.

The euro rose for a third straight day as strong demand at an auction of Spanish bonds eased concern about the country's ability to finance its debt and a spike in Chinese exports boosted confidence on global growth.

The euro rose 1% to US$1.2084, headed for its best day against the US, dollar in two weeks.

Despite this week's gains, the euro has lost more than 15% against the US dollar in 2010.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.75% to 254.96.

Oil prices climbed more than 1% in the biggest three-day rally in a month, lifted by strong

Chinese export data and as the International Energy Agency raised its estimate of global oil demand.

US crude for July rose 89 cents, or 1.2%, to US$75.27 a barrel at 12.15pm EDT.

ICE Brent rose 43 cents to US$74.70.

Spot gold hit a low of US$1,214.65 and was at US$1,218.25 an ounce at 2.18pm EDT (1818 GMT), against US$1,230.35 late in New York on Wednesday.

US gold futures for August delivery settled down US$7.70 at US$1,222.20.

US copper futures climbed back above US$2.90 per pound Thursday morning.

Businesswire.co.nz

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