October 23, 2014
US data help buoy global stocks, euro
The euro rose against the dollar after the European Central Bank gave no sign of an imminent rate cut and better-than-expected US economic data helped lift global stocks.
Relative calm in vulnerable emerging markets such as Turkey and South Africa also supported riskier assets and drew investors away from safe-haven US and German government bonds. Major US and European stock indexes rose more than 1 percent.
The ECB left its main interest rate at 0.25 percent, but the central bank's president, Mario Draghi, surprised markets by not signaling a near-term rate cut during remarks to reporters despite deflation worries in the 18-country euro zone.
Draghi's remarks sent the euro, which had lost ground to the dollar immediately after the decision, to a one-week high of $1.3619 and pushed up German bund yields. The euro was last up 0.4 percent at $1.3590.
Strong corporate earnings reports boosted European stocks by 1.5 percent, dulling disappointment over the ECB. Wall Street was having its best day in a week, thanks in part to data showing fewer Americans than expected filed for first-time jobless claims.
The Dow Jones industrial average was up 171.17 points, or 1.11 percent, at 15,611.40. The Standard & Poor's 500 Index was up 20.34 points, or 1.16 percent, at 1,771.98. The Nasdaq Composite Index was up 46.32 points, or 1.15 percent, at 4,057.87.
Uncertainty about the US recovery has pushed the S&P down more than 4 percent this year after it rose by 29.6 percent in 2013. That likely will not last, said Michael Cuggino, president of Pacific Heights Asset Management, though investors should probably expect less robust returns in 2014.
The MSCI world equity index rose 1.2 percent, while the yield on the benchmark 10-year US Treasury note rose to 2.71 percent as investors took on more risk. The 10-year yield hit a three-month low of 2.57 percent on Monday.
The banking sector was in the spotlight after Credit Suisse missed expectations with a marginal uptick in fourth-quarter net profit, and its shares were down more than 2 percent.
Relative calm in the capital-hungry emerging markets of Turkey, South Africa and India also lifted developing stocks, after a rout in recent weeks that had driven safe-haven bids to US Treasuries and the yen.
Emerging markets have been inflated in recent years by huge amounts of cheap cash created by the US Federal Reserve. With the Fed now scaling back the program, that flow is reversing, putting pressure on emerging currencies and asset markets.
Emerging stocks were up 1.2 percent after hitting five-month lows earlier this week, while the Turkish lira and South African rand held above recent troughs.
US crude oil settled up 46 cents at $97.84 a barrel. Brent crude rose 96 cents at $107.20.
European equities bounced back in good volume after a two-week drop, with reassuring earnings reports boosting shares despite the European Central Bank dashing hopes of some immediate extra monetary easing.
The pan-European FTSEurofirst 300 closed near intraday highs, rallying with Wall Street despite a temporary setback after the ECB left interest rates on hold.
Charts show the euro zone's blue-chip Euro STOXX 50 index rebounded after its nine-day relative strength index (RSI) slipped to 26 in the previous session. A level below 30 is considered "oversold" and often attracts buyers.
The index was up 1.6 percent at 3,010.79 points at the close, while the pan-European FTSEurofirst 300 index rose 1.5 percent to 1,290.41 points after its RSI fell to 27 on Wednesday.
Japan's Nikkei average fell in a choppy session, erasing earlier gains as investors stayed cautious before the US nonfarm payrolls report due tomorrow, offsetting buying in companies with strong earnings prospects like Mazda Motor.
The Nikkei ended down 0.2 percent at 14,155.12, hovering near a four-month low of 13,995.86 hit the previous day.