Global stocks, euro gain as Fed meeting begins

NEW YORK Tue Jan 29, 2013 4:17pm EST

1 of 8. Traders work on the floor of the New York Stock Exchange, January 18, 2013.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - Stock markets around the world rose and the dollar fell to a 14-month low against the euro on Tuesday amid rising risk appetite as the Federal Reserve began a two-day policy meeting in which it is expected to maintain its easy monetary policy.

A report that showed U.S. single-family home prices rose in November, building on a string of gains that point to a housing market that is on the mend, added to investor optimism on economic growth.

Still, investors were cautious about making big bets, given mixed U.S. economic data, the run-up in stocks in recent weeks and risk in the form of a slew of economic reports for the rest of the week, as well as the Fed meeting.

Markets were initially weaker on a report showing U.S. consumer confidence dropped in January to its lowest in more than a year.[ID:nL1N0AY5B0] But that same data kept alive expectations the Fed will maintain its ultra-easy monetary policy for the foreseeable future.

"There is a serious split between the attitudes of consumers and the attitudes of the markets," said Joseph Trevisani, chief market strategist at WorldWideMarkets, in Woodcliff Lake, New Jersey, after the consumer confidence data. "This may make for a weaker dollar as it makes it less likely the Fed will contemplate an early removal of QE," referring to the central bank's debt-buying program called quantitative easing.

The euro extended gains versus the dollar, breaking above key resistance to hit a 14-month high. It last traded at $1.3491.

STOCKS GAIN

The Dow Jones industrial average .DJI gained 72.49 points, or 0.52 percent, at 13,954.42. The Standard & Poor's 500 Index .SPX was up 7.66 points, or 0.51 percent, at 1,507.84. The Nasdaq Composite Index .IXIC was down 0.64 points, or 0.02 percent, at 3,153.66.

"A move like this in one month is extraordinary, and keeping the gains going will depend on concrete news like earnings and data that show the economy is getting better," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "We haven't seen enough of that to make people jump in after the rally we've had."

Recent gains in stocks have largely come on a strong start to the corporate earnings season, and that trend continued on Tuesday with positive results from both Valero (VLO.N) and Pfizer Inc (PFE.N).

European stocks scaled two-year highs, boosted by miners, as optimism about economic recovery gained momentum following the encouraging U.S. home price data and comments on growth in top metals consumer China.

The benchmark FTSEurofirst 300 index .FTEU3 was up 0.4 percent. The index is up 24 percent from its June lows.

Gains across Asian markets, led by a big rally in Australian shares, helped to lift MSCI's world equity index .MIWD00000PUS 0.6 percent to a 20-month high.

U.S. DEBT

In the U.S. Treasury debt market, benchmark 10-year yields proved unable to hold above the key 2 percent level touched on Monday, with investors looking ahead to a debt auction later in the day, as well as the Fed meeting.

The benchmark 10-year U.S. Treasury note was down 9/32, the yield at 1.9955 percent.

Debt prices had earlier reversed losses to advance after the U.S. consumer confidence data.

Investors now await the outcome of the Fed meeting on Wednesday. The Fed is not expected to change its stance after deciding only in December to loosen conditions further. However, investors are watching to see if changes in the membership of the policy-setting committee for 2013 could signal a shift in the future.

Gold snapped a four-day losing streak to rise 0.5 percent to around $1,662.60 an ounce, but any hint that the Fed is considering an end to its loose monetary policy would probably send the precious metal down.

Brent crude and U.S. oil prices rose on the U.S. housing data. Brent crude climbed 72 cents to $114.20 a barrel and U.S. crude rose $1.01 to $97.45 per barrel.

(Reporting by Nick Olivari; Editing by Dan Grebler)

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Comments (1)
bettysenior wrote:
Great for the time being and there is no question that the USA is a great nation. It led the 20th century to new heights in living standards, prosperity and equality. But sadly from the last quarter of that century it lost its way in respect of innovation and driving the USA even to greater heights. What seems to have happened is that complacency set in with US politicians who took their eye off the innovation/wealth mechanism. Bush junior more so than any other US president as he took funding away from ‘pure’ scientific research, closing thousands of scientific laboratories and government research establishments in the process. But where it has to be said, that this was on-going from the early 1970s. Bush compounded this effect and where any future innovation potential was sacrificed on the political altar of ‘we don’t need to fund pure research as it does not give us a quick return’. Long-term strategies had no place in politics and that is the same today. That is unfortunate as only long-term strategies will now win back any economic advantage.

Unfortunately again this lack of vision and understanding of the unique power of Innovation to create dynamic economies by US politicians drove a nail year-on-year into the coffin of US wealth creation and the living standards of the US people as others 1000s of miles away took up the challenges of invention and creativity. Indeed these SE Asian nations are now ripe to take the high ground in world economics with low debt, high investment power and now knowing that innovation is the golden key to capturing economic supremacy.

No matter which way you look at things US (and western) politicians do not understand what innovation really is and how it transforms nations. They should do but where their senses are completely lacking when one considers as an American miracle that of Apple and how this great company came from near destruction to become the largest company in the world (only recently losing that crown to Exxon again).

Therefore not until US and western politicians base their economic strategies on innovation will they regain the positions that they had for their nations prior to the 1970s. Indeed US politicians took no notice of the development of the ORE-STEM complex that Seaborg and others supported as our only way to continual increase our living standards and wealth. So the US dream was destined for decline when their politicians did not take seriously what some of their greatest scientists and engineers were telling them.

Now the ‘West’ using its present economic thinking that has not changed in over 40 years has only one way to go and that is downward. Let us hope therefore that US politicians eventually come to their senses and build the world’s most creative complex, the ORE-STEM, for their people and all humanity. For that once built will provide the continual catalysts for total sustainability in this century and beyond.

Will they, I very much doubt it and where in another quarter of a century with the same political thinking the US and other western nations will have living standards that are up to 50% of what they are now presently.

A sad story really and only if they had taken notice of some of the greatest minds of the 20th century (Seaborg, Argyris, Karle, Menelaus etc). But there again they are just politicians not people with great vision and insight. A pity !

Dr. David Hill
World Innovation Foundation

Jan 29, 2013 2:22pm EST  --  Report as abuse
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