While you were sleeping: Stocks extend gains into 2010

Tuesday 5th January 2010

Global stocks powered into the new year, buoyed by manufacturing reports in China, India and the U.S., which fuelled optimism that the recovery was accelerating.

Overnight, the Dow Jones Stoxx 600 Index surged 1.4% to 257.31, extending the 28% advance it recorded last year. It closed Monday at its highest level since Oct. 3, 2008.

The gains were widespread in Europe. The FTSE 100 rose 1.5%, Germany’s DAX gained 1.4% and France’s CAC 40 Index was 2% higher.

In early afternoon trading on Wall Street, all three major benchmarks were higher.

The Dow Jones Industrial Average rose 1.57% to 10,591.59, the Standard & Poor’s 500 Index rose 1.59% to 1132.79 and the Nasdaq Composite Index rose 1.79% to 2309.72.

The economic reports out of China and the U.S. bolstered confidence that the nascent recovery in the U.S. was spreading elsewhere and that global demand was poised to rise.

As a result of the brightening global outlook – and a cold snap in the U.S., oil surged above the US$80 mark. Gold and other precious metals as well as copper and other base metals also began the year with gains.

Manufacturing grew at its fastest pace in five years in China last month. HSBC and Markit Economics said their purchasing managers’ index for China rose to a seasonally adjusted 56.1. The index is based on a survey of more than 400 manufacturers.

As for the U.S., the Institute for Supply Management said its factory index reached 55.9 in December, its highest level since April 2006 and the fastest pace in more than three years.

The figure compared with economists’ forecast for an increase to 54.3, according to 65 projections in a Bloomberg News survey. Estimates ranged from 52 to 56. Manufacturing accounts for about 12% of the economy.

While the latest economic report bodes well for the U.S., investors sold the U.S. dollar ahead of Friday’s key labour report.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.51% to 77.46.

In midday New York trading, the euro was up 0.7% against the dollar at US$1.4428.

Against the yen, the dollar traded down 0.6% at 92.46 yen, giving up gains which lifted it to a four-month high of 93.21 yen. Traders said resistance was seen ahead of its 200-day moving average around 93.60 yen, according to Reuters.

In China, yuan forwards on speculation policy makers will allow the currency to resume appreciation this year. Twelve-month non-deliverable forwards rose 0.2% to 6.6495 per dollar as of 1:03 p.m. local time, according to Bloomberg.

The U.S. Treasury plans to sell 10-year inflation-protected notes on Jan. 11 and issue three-year notes on Jan. 12. Ten-year notes will be sold on Jan. 13 and 30-year bonds on Jan. 14.

In commodities markets, U.S. crude for February delivery rose US$1.86 to US$81.22 a barrel by 1521 GMT.

Oil got a boost from a dispute between Russia and Belarus as well as cold winter weather in the U.S.

U.S. natural gas for February delivery rose as much as 32.2 cents to US$5.894 per million British thermal units on the New York Mercantile Exchange.

As for precious metals, gold for February delivery added 2.4% to US$1122.10 an ounce in New York.

Gold’s strength paced palladium to its highest since July 2008, and platinum to a 16-month peak. Both are taking support from talk of new platinum- and palladium-backed exchange-traded funds.

Silver was at $17.36 an ounce against $16.84.

Copper for delivery in March rose 2% to US$3.413 a pound in New York after earlier reaching a 16-month high of US$3.429.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 1.9% to 288.86.

Businesswire.co.nz

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