Global stocks, oil rebound on economic data

NEW YORK Tue Feb 5, 2013 4:48pm 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) - Global equity markets and oil prices bounced back on Tuesday after data showed the vast U.S. services sector extended a three-year expansion in January, while business activity in the euro zone showed signs of recovery.

U.S. and European stocks rallied, with the S&P 500 and Nasdaq gaining more than 1 percent, recouping most of their losses after a sharp sell-off the previous session that was sparked by renewed worries about the euro zone crisis.

A measure of world equity markets also was higher, though only slightly, because of a decline in emerging market shares.

Strong fourth-quarter earnings and signs of improving economic growth suggested the trend for equities remains higher.

"Yesterday was the first real down day of the year, which shows that we are in this strong bull market. Today we are back to the normal pattern. People are realizing that we've over-reacted to Europe yesterday," said Uri Landesman, president of hedge fund Platinum Partners in New York.

The Institute for Supply Management said its U.S. services sector index eased slightly, to 55.2 last month from 55.7 in December. The reading was in line with economists' forecasts, according to a Reuters survey.

In Europe, Markit's Eurozone Composite PMI, based on business activity across thousands of companies and a good gauge of economic growth, rose in January to a 10-month high of 48.6 from 47.2 the previous month.

The day's data bolstered the view that the world economy was improving, a sentiment that has lifted stock markets around the globe and pushed the benchmark U.S. S&P 500 to a fresh five-year intraday high on Tuesday.

In the biggest leveraged buyout since the financial crisis, Michael Dell reached a deal to take computer maker Dell Inc DELL.O private for $24.4 billion. The move will allow the billionaire chief executive to try to revive the fortunes of his company without Wall Street scrutiny.

Dell shares closed up 1.1 percent at $13.42.

Corporate results also helped the rally. With 56 percent of S&P 500 companies reporting, 68.7 percent posted earnings that beat expectations, or better than the 65 percent rate over the past four quarters or the 62 percent pace since 1994.

The Dow Jones industrial average .DJI closed up 99.22 points, or 0.71 percent, at 13,979.30. The Standard & Poor's 500 Index .SPX rose 15.58 points, or 1.04 percent, at 1,511.29. The Nasdaq Composite Index .IXIC gained 40.41 points, or 1.29 percent, at 3,171.58.

MSCI's all-country world equity index .MIWD00000PUS rose 0.28 percent to 354.97, while the FTSEurofirst 300 .FTEU3 index of top European shares closed up 0.3 percent at 1,154.47.

U.S. Treasuries prices fell. The benchmark 10-year U.S. Treasury note was down 17/32 in price to yield 2.016 percent.

Brent crude oil rose 92 cents a barrel to settle at $116.52, while U.S. crude futures settled up 47 cents at $96.64.

"We do not envisage prices receding for any great length of time," said Carsten Fritsch, an analyst at Commerzbank. "The supply-side risks still prevailing, shrinking OPEC supplies and the brightening global economic outlook all suggest that such a retreat is unlikely."

The euro rose against the dollar and yen, returning to its months-long trend of appreciation, as better-than-expected euro zone data affirmed expectations that the European Central Bank will keep policy steady when it meets this week.

The euro, which had taken the brunt of the selling and fallen from a high of over $1.37 at the end of last week to under $1.35 on Monday, rose 0.49 percent to trade at $1.3579.

(Additional reporting by Richard Hubbard in London; Editing by Dan Grebler and Nick Zieminski)

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Comments (5)
Vuenbelvue wrote:
Everytime I look the Euro goes up and the USD goes down. Last week, the Euro was $1.38
Barclays PLC (BCS, BARC.LN) said Monday that it raised its forecasts for the euro exchange rate against the dollar and pound, citing an improvement in the euro-zone economy.
The world’s third biggest currency-dealing bank said it now expects the euro to trade at $1.36 against the buck in three months time from $1.32 previously, and at $1.32 in six months time from $1.26 previously.
Barclays also said it expects the euro to trade at $1.28 in 12 months, having previously had a forecast of $1.22.

Read more: http://www.foxbusiness.com/news/2013/02/04/barclays-raises-euro-forecasts-against-dollar-pound/#ixzz2JzCgegtV

Feb 04, 2013 9:04pm EST  --  Report as abuse
dareconomics wrote:
The good news is that the Eurozone economy is decreasing at a slower rate. The rate of decrease has slowed over the past three months, so we have a positive trend here.

The bad news is that Germany is accounting for most of the uptick, and the divergence between the core and the periphery is growing. Even worse, France has joined the periphery economies. Germany is the only one of the four largest economies to be in expansion:

January Markit PMI Germany

The eurocrisis in its essence is a divergence between the rich and poor countries with the common usage exacerbating this split. While some data may show improvement, those “green shoots” are merely noise. The signal is the strengthening of the bifurcation between the haves and have-nots. To wit, two charter members of the periphery, Italy and Spain, along with new member France remain safely within contractionary territory:

January Markit PMI France January Markit PMI Italy January Markit PMI Spain

Spain is improving, and at least Italy is not getting worse, but France is peering over the cliff.

The problem with using one currency for very different economies is that only one monetary policy may be implemented. German requires a stable policy to keep inflation at bay, but the other countries, particularly France, require expansion. The bottom line is that as long as these economies continue to diverge, the eurocrisis will continue to fester.

Full post with charts at dareconomics.com

Feb 05, 2013 12:57pm EST  --  Report as abuse
dareconomics wrote:
The good news is that the Eurozone economy is decreasing at a slower rate. The rate of decrease has slowed over the past three months, so we have a positive trend here.

The bad news is that Germany is accounting for most of the uptick, and the divergence between the core and the periphery is growing. Even worse, France has joined the periphery economies. Germany is the only one of the four largest economies to be in expansion:

January Markit PMI Germany

The eurocrisis in its essence is a divergence between the rich and poor countries with the common usage exacerbating this split. While some data may show improvement, those “green shoots” are merely noise. The signal is the strengthening of the bifurcation between the haves and have-nots. To wit, two charter members of the periphery, Italy and Spain, along with new member France remain safely within contractionary territory:

January Markit PMI France January Markit PMI Italy January Markit PMI Spain

Spain is improving, and at least Italy is not getting worse, but France is peering over the cliff.

The problem with using one currency for very different economies is that only one monetary policy may be implemented. German requires a stable policy to keep inflation at bay, but the other countries, particularly France, require expansion. The bottom line is that as long as these economies continue to diverge, the eurocrisis will continue to fester.

Full post with charts at dareconomics.com

Feb 05, 2013 12:57pm EST  --  Report as abuse
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