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

Wed Jun 26, 2013 4:49pm EDT

* Global equity markets, 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 close higher in rocky trade
    * Gold hits an almost 3-year low


    By Herbert Lash
    NEW YORK, June 26 (Reuters) - The dollar rose and global
equity markets gained for a second day on Wednesday after a
surprisingly sharp downward revision to first-quarter U.S.
economic growth eased concerns the Federal Reserve might 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 of stocks, commodities and bonds last week.
    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. 
    The benchmark S&P 500 stock index was on track for its
biggest two-day gain in three weeks, cutting the decline since
its all-time closing high a month ago to 3.95 percent.
    "Despite all the rhetoric and fear about tapering, this will
keep the Fed firmly planted in stimulus, which is a positive for
the market," said Michael Mullaney, chief investment officer at
Fiduciary Trust Co in Boston, which oversees about $9.5 billion.
    "This is another example of bad news being good news."
    European stocks gained close to 2 percent to post their
biggest two-day gain since April after ECB president Mario
Draghi said an accommodative monetary policy was still
appropriate. The bank's policy "will stay accommodative for the
foreseeable future," he said. 
    MSCI's all-country world equity index rose
0.96 percent, while the pan-European FTSEurofirst 300 index
 of leading regional companies gained 1.71 percent to
close at 1,149.71 points. The EuroSTOXX 50 index 
rose 2.34 percent.
    The Dow Jones industrial average closed up 149.83
points, or 1.02 percent, at 14,910.14. The Standard & Poor's 500
Index rose 15.23 points, or 0.96 percent, at 1,603.26.
The Nasdaq Composite Index gained 28.34 points, or 0.85
percent, at 3,376.22. 
    The S&P 500's advance followed a gain of nearly 1 percent on
Tuesday, spurred after 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 story of the
day on Wednesday, 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," he said. The People's Bank "is going to come in
and make sure the Chinese banking system doesn't collapse." 
    Gold hit its lowest 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. Silver dropped 5
percent and platinum group metals also declined sharply.
 
    Spot gold prices fell $53.03 to $1,223.70 an ounce.
U.S. gold futures for August delivery settled down $45.30
at $1,229.80.
    Bond markets in Europe and benchmark U.S. Treasuries
continued to claw back ground, although investors remained
worried the rebound could give way with markets likely to need
more time to acclimatize to the new environment.
    U.S. Treasuries gained after a recent slump took yields to
near two-year highs, with the weaker-than-expected GDP pointing
to continued potential for fragility in the world's biggest
economy.
    The benchmark 10-year U.S. Treasury note was up
17/32 in price to yield 2.5465 percent.
    Euro zone bonds rose across the board on the ECB's pledge to
keep exceptional monetary policy measures for the foreseeable
future.
    German Bund futures came off 8-month lows on Monday
of 139.90 to settle up 49 ticks at 141.03.
    If economic data is weak, "the punch bowl stays where it is.
Good news, economically, the punch bowl gets moved a little bit
further away," said Wilmer Stith, co-manager of the Wilmington
Broad Market Bond Fund in Baltimore. 
    Oil prices traded near break-even after data showed an
unexpected rise in U.S. crude stocks, which combined with the
GDP report, stoked concerns about the outlook for demand in the
world's top consumer.
    Brent crude for August delivery rose 40 cents to
settle at $101.66 a barrel. U.S. crude settled up 18
cents at $95.50 a barrel.
    The euro was down 0.60 percent at $1.3005, 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 comment)
highlights that relative central bank policy will soon shift
from supporting to weighing on the euro," said Camilla Sutton,
chief FX strategist at Scotiabank.
    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 was up 0.48 percent at 82.958.
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