GLOBAL MARKETS-U.S. stocks jump to record highs, dollar rises

Tue May 14, 2013 4:23pm EDT

* Wall Street shares resume rise on steady growth outlook
    * S&P 500, Dow rise to record intraday highs
    * Dollar index climb to strongest level since July
    * Oil, gold prices extend recent losses; bond yield rise


    By Richard Leong
    NEW YORK, May 14 (Reuters) - Wall Street stocks jumped to
record highs on Tuesday on hopes steady U.S. growth will extend
equities' stellar run, while a strengthening dollar fueled
further losses in oil and gold.
    U.S. equities have risen the past three weeks with the
Standard & Poor's 500 index racking up a 16 percent gain so far
this year, due mainly to the sea of cash produced by the Federal
Reserve and other major central banks' policies of ultra-low
interest rates and asset purchases to stimulate their economies.
    "The developed economies of the world are all easing
aggressively, the money is looking for a home and it's ending up
in the stock markets," said Bucky Hellwig, senior vice president
at BB&T Wealth Management in Birmingham, Alabama.
    Less worried investors resumed purchases of stocks and other
higher-return assets and reduced their holdings of safe-haven
U.S. and German government bonds. The rise in global interest
rates was mitigated by a weaker-than-expected report on German
investor sentiment due to the poor outlook on the region's
economy. 
    "People realize the world is not melting down. Growth isn't
surging either, but it's growth and the market is adapting to
that," said Peter Jankovskis, co-chief investment officer at
OakBrook Investments LLC in Lisle, Illinois.
    While worries about another spring "swoon" might have
receded after the strong April U.S. payrolls data, the outlook
for worldwide economic growth remained lukewarm.
    Mohamed El-Erian, chief executive of PIMCO, which manages
the world's largest bond mutual fund, said in the firm's outlook
for the next three to five years that U.S. economic growth will
not be "much greater" than 2 percent, while China will maintain
growth in the range of 6 to 7.5 percent. 
    This modest view on the global economy, together with more
energy output in North America, led the International Energy
Agency to project a "more comfortable" energy picture over the
next five years. 
    The Dow Jones industrial average ended up 123.57
points, or 0.82 percent, at 15,215.25. The Standard & Poor's 500
Index finished up 16.57 points, or 1.01 percent, at
1,650.34. The Nasdaq Composite Index was closed up 23.82
points, or 0.69 percent, at 3,462.61.  
    The FTSEurofirst 300 index of Europe's top shares 
ended up 0.45 percent at 1,236.62, erasing early losses on
disappointing investor confidence data from Germany's ZEW think
tank. The index rose for a fourth straight session, just short
of the near five-year intraday high set on Monday. 
    U.S. and European equity gains lifted the MSCI global index
 to 375.72, up 0.4 percent on the day. They more
than offset a 0.16 percent drop of Tokyo's Nikkei index.
    As the Dow and S&P 500 index posted record intraday peaks,
the dollar rose to a nine-month-plus high versus a basket of
major currencies. The dollar index was up 0.37 percent at
83.59 after touching 83.60, a level not seen since July 26.
    The greenback hit a 4-1/2-year high against the yen and last
traded at 102.28 yen, up 0.45 percent on the day. So far in May,
it has gained 10.5 percent against the Japanese currency. 
    "We think against the yen, the dollar can go higher, helped
by rising U.S. yields," said Marcus Hettinger, head of global
forex research at Credit Suisse in London.
    The yield on benchmark U.S. 10-year Treasury notes
 rose to a seven-week high. The U.S. 10-year yield
was last 1.966 percent, up 5 basis points on the day, while
German Bund futures were down 56 basis points or 0.4
percent at 144.33, the lowest in seven weeks.  
    U.S. and German yields have risen in the wake of the Bank of
Japan's $1.4 trillion stimulus program, as investors pared their
safe-haven holdings of these debt instruments. BoJ's bold asset
purchase scheme also caused some rethinking about global growth
and interest rates among the world's major economies.
  
    The dollar's run-up caused further selling on gold 
and oil prices . A stronger dollar makes
dollar-denominated commodities such as oil more expensive for
holders of other currencies. 
    Brent crude oil fell as traders were caught between hopes of
a revival in global economic growth and evidence of ample supply
from IEA, the West's energy watchdog. June Brent futures settled
down 22 cents or 0.21 percent at $102.60 a barrel, while U.S.
crude futures settled 96 cents or 1.01 percent lower at $94.21.
 
    Spot gold prices were on track for a fourth consecutive
losing session as an early rebound faded with a turnaround in
the dollar. Bullion was last 0.30 percent lower at $1,425.76 an
ounce.
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