GLOBAL MARKETS-Shares, dollar gain after GDP data eases Fed fears

Wed Jun 26, 2013 12:15pm EDT

* European shares, bonds rebound for second day
    * U.S. 1st-quarter final growth estimate cut to 1.8 pct
    * Dovish comments from ECB's Draghi weigh on euro
    * Oil prices slide, bond prices gain


    By Herbert Lash
    NEW YORK, June 26 (Reuters) - The dollar rose and global
equity markets gained for a second day in a row on Wednesday
after a surprisingly sharp downward revision to first-quarter
U.S. economic growth eased concerns that the Federal Reserve may
soon begin to withdraw stimulus.
    In addition, moves by China to calm bank fears and
supportive signs from the European Central Bank on the need for
continued stimulus helped extend Tuesday's rebound after the
global sell-off last week of stocks, commodities and bonds.
    U.S. gross domestic product grew at only a 1.8 percent
annual rate in the first quarter, the Commerce Department said
in its final estimate, down from the prior estimate of a 2.4
percent pace. 
    "Despite all the rhetoric and fear about tapering, this will
keep the Fed firmly planted in stimulus, which is a positive for
the market," Michael Mullaney, chief investment officer at
Fiduciary Trust Co in Boston, which oversees more than $9.5
billion, said.
    "This is another example of bad news being good news," he
said.
    The S&P 500 was on track for its biggest two-day gain in
three weeks, while European stocks gained close to 2 percent
after the ECB's president, Mario Draghi, said an accommodative
monetary policy was still appropriate. The bank's policy, he
said, "will stay accommodative for the foreseeable future."
 
    MSCI's all-country world equity index rose
0.79 percent, while the pan-European FTSEurofirst 300 index
 of leading regional companies gained 1.68 percent to
close at a provisional 1,149.33 points. The  EuroSTOXX 50 index
 rose 2.4 percent.
    The Dow Jones industrial average was up 89.49 points,
or 0.61 percent, at 14,849.80. The Standard & Poor's 500 Index
 was up 9.68 points, or 0.61 percent, at 1,597.71. The
Nasdaq Composite Index was up 21.71 points, or 0.65
percent, at 3,369.60. 
    The S&P 500 advance followed a gain of nearly 1 percent on
Tuesday, which came as U.S. data on durable goods orders, sales
of new homes and consumer confidence all topped expectations.
    A pledge by China's central bank, the People's Bank of
China, to act as a lender of last resort was the real story of
the day, said Fred Dickson, chief market strategist at The
Davidson Cos. in Lake Oswego, Oregon.
    "The global fears regarding the possibility of a Chinese
credit situation spilling over and becoming very serious has
eased off some," Dickson said. The People's Bank "is going to
come in and make sure the Chinese banking system doesn't
collapse." 
    Gold hit its lowest level in almost three years and was on
course for a record quarterly loss. Prices could slide to levels
below $1,000 per ounce, investors and analysts said.
 
    Bond markets in Europe and benchmark U.S. Treasuries also
continued to claw back ground, although investors remained
worried that the rebound could give way with markets likely to
need more time to acclimatize to the new environment.
    The benchmark 10-year U.S. Treasury note was up
15/32 in price to yield 2.554 percent.
    "Having seen an incredibly violent sell-off in the Treasury
markets that took everything with it, there is a certain amount
of settling back going on," said Kit Juckes, a market strategist
at Societe Generale in London.
    Brent crude for August delivery fell 46 cents at
$100.80 a barrel. U.S. crude fell 62 cents to $94.70 a
barrel.
    The euro was down 0.61 percent at $1.3004, stung by
Draghi's comments on an accommodative monetary policy and the
risks to growth in the euro zone. 
    "Juxtaposed against shifting Fed policy, (Draghi's comments)
highlights that relative central bank policy will soon shift
from supporting to weighing on the euro," Camilla Sutton, chief
FX strategist at Scotiabank, said.
    The dollar rose to a three-week high of 83.003 against a
basket of currencies, buoyed mainly by solid gains
against the euro. It later traded at 82.908.
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