While you were sleeping: A round of 18-month highs

Wednesday 24th March 2010

Hopes for IMF aid for Greece and better than expected housing data in the US provided enough impetus for shares to rise to 18- month highs in both Europe and on Wall Street overnight.

While the gains were modest across the board, investors seem keen to push valuations higher.

In afternoon trading, the Dow Jones Industrial Average rose 0.51% and the Standard & Poor’s 500 gained 0.28%. The Nasdaq Composite was up 0.36% and poised to close above the 2400-mark.

Among the advancers were Caterpillar Inc, Intel Corp, Integrated Silicon Solution Inc and Cliffs Natural Resources Inc. Google fell as its fight with Chinese censorship intensified.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 1.66% to 16.59.

In Europe overnight, the Dow Jones Stoxx 600 rose 0.7% to 261.85, its highest since September 26, 2008.

Among national benchmarks, the UK’s FTSE 100 edged 0.52% higher. Germany’s DAX 30 added 0.5% and France’s CAC 40 ended up 0.62%.

Some of the biggest movers included Legal & General, Carnival, Opap SA, British Airways Plc and Cairn Energy Plc.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.31% to 80.83.

The euro weakened versus 14 of its 16 major counterparts, according to Bloomberg News, after a German Finance Ministry official told reporters in Berlin that Germany and France agreed to back IMF aid to Greece.

The euro may fall toward US$1.20 for the first time since March 2006, according to BlueGold Capital Management LLP, Bloomberg also reported.

In mid-afternoon trading in New York, the euro was down 0.3% against the dollar at US$1.3516. The single currency hit a three-week low at US$1.3461 on Monday, according to Reuters data.

The euro slipped 0.2% to 122 yen. The dollar rose 0.2% to 90.35 yen.

While there are drawbacks to a weaker euro, it could bolster profits for some companies.

A further decline in the euro would be welcome relief for the European economy by boosting exports, David Owen, chief European economist at Jeffries Group Inc in London told Bloomberg.

In a separate report, Bloomberg said the 10-year U.S. swap spread turned negative for the first time on record amid rising demand for higher-yielding assets such as corporate and emerging market securities.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 0.31% to 271.44. Oil was steady and gold advanced.

U.S. crude for May delivery was up 20 cents at US$81.80 a barrel by 11:53 a.m. EDT. The April delivery contract expired on Monday, settling up 57 cents at $81.25.

London Brent crude for May rose 18 cents to $80.72.

Gold slid to as low US$1094.30 an ounce reflecting the U.S. dollar’s easing against the euro.

Spot gold was bid at US$1107.15 an ounce at 1610 GMT. US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose US$6.60 to US$1106.10 an ounce.

‘‘The US$1.35 level for the euro is really key at this stage,” Standard Bank analyst Walter de Wet told Reuters. “Yesterday, when we had a drop below US$1.35, gold fell quickly and the sell-off in commodities was equally swift.”

“As soon as gold gets to US$1095, there is really decent physical demand, especially out of Asia, supporting it,” the analyst said.

Businesswire.co.nz

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