World stocks rise on China economic signal, dollar falls

NEW YORK Tue Jul 23, 2013 4:56pm EDT

1 of 9. Traders work on the floor of the New York Stock Exchange shortly after the markets opening in New York, July 22, 2013.

Credit: Reuters/Lucas Jackson

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NEW YORK (Reuters) - World stock markets rose to near five-year highs on Tuesday, boosted by views that China was moving to support its cooling economy, while the dollar fell to one-month lows.

Major U.S. equity indexes ended little changed, with the Dow rising and Nasdaq falling after a mixed batch of earnings, including from chemical maker DuPont (DD.N) and insurer Travelers (TRV.N).

The Standard & Poor's 500 index snapped a four-day winning streak. It earlier set an intraday record high and came within 2 points of its milestone of 1,700 before turning lower. The Dow also reached an intraday record high.

Copper prices rebounded from early losses after China's president, Xi Jinping, in remarks published on Tuesday, emphasized the government's determination to restructure the country's slowing economy. Yields on low-risk U.S. and German government debt rose as higher equity prices reduced their safe-haven appeal.

Oil prices also rose on optimism on China, as did shares of mining companies. Local media in China reported the government was looking to increase investment in railroad projects to help relieve a capacity glut in steel, cement and other construction projects.

"Managing to keep (Chinese growth) above 7 percent will certainly be viewed as a positive stance," said IG Markets analyst Alastair McCaig in London.

The MSCI world equity index .MIWD00000PUS, which tracks stocks in 45 countries, climbed 0.1 percent to 376.02, close to the five-year high set in May.

The Dow Jones industrial average .DJI ended up 22.19 points, or 0.14 percent, at 15,567.74. The Standard & Poor's 500 Index .SPX closed down 3.14 points, or 0.19 percent, at 1,692.39. The Nasdaq Composite Index .IXIC finished down 21.11 points, or 0.59 percent, at 3,579.27. .N

After the closing bell, Apple Inc. (AAPL.O) said its third- quarter results came in stronger-than-forecast at $7.47 a share, lifting the stock of the iPhone and iPad maker by 4.5 percent. Before the results, Apple shares closed down 1.7 percent at $418.99.

U.S. shares will likely struggle to extend their winning streak unless there are more upbeat earnings and economic developments, analysts said.

"Valuations are decent, there's positive monetary pressure, earnings are just OK... It's hard to get people excited but the market keeps grinding higher," said John Manley, chief equity strategist at Wells Fargo Funds Management in New York.

"It will be slow over the summer, but the market will have an upward bias."

European top shares closed lower on a late wave of selling, with semiconductors group STMicroelectronics leading the way down after weak results. The broad FTSE Eurofirst 300 index .FTEU3 closed down 0.3 percent at 1,207.16. Chipmaker StMicroelectronics STMP.PA tumbled 10.4 percent to 6.735 euros. .EU

But mining shares rose on the news out of China, with Anglo American (AAL.L) rising 2.1 percent and BHP Billiton (BLT.L) gaining 2.0 percent.

In Asia, an upgraded economic outlook from Japan's government lifted Tokyo's Nikkei stock index .N225 0.82 percent to 14,778.51.

DOLLAR SLIPS AGAIN

The dollar fell to one-month lows against a basket of currencies as an early bounce faded.

Investors earlier bet that the currency recently had declined too far, too fast despite the debate about when the Federal Reserve would begin to slow its stimulus measures.

Fed Chairman Ben Bernanke's dovish remarks have emphasized that the U.S. central bank's bond buying will continue in some form and interest rates will likely remain low for the foreseeable future.

Heightened expectations that Japan's government will stick to expansionary policies after weekend elections weakened the dollar against the yen on Monday. The victory in parliament's upper house election on Sunday cemented Prime Minister Shinzo Abe's hold on power and gave him a stronger mandate for his programs to stimulate the world's third-biggest economy.

An early rise in U.S. 10-year Treasury note yields above the 2.50 percent level ahead of this week's $99 billion in coupon-bearing supply briefly propped up the dollar. The benchmark 10-year U.S. Treasury note was down 8/32 in price with a yield of 2.514 percent, up 3.0 basis points on the day.

The German 10-year Bund yield, meanwhile, was 1.552 percent, little changed from Monday's close.

The dollar index .DXY fell 0.3 percent to 81.971. The greenback was 0.12 percent weaker against the yen at 99.50 yen after briefly trading back above the 100 yen level, while it was down 0.4 percent versus the euro at $1.3231. <FRX/>

In the commodities market, copper gained 0.27 percent at $7,048 a metric ton (1.1023 tons) in London, erasing early losses linked to worries about a supply glut and sluggish global demand.

Oil prices rebounded from early lows on optimism about China's efforts to avert a hard economic landing. Brent oil settled up 27 cents, or 0.25 percent, to $108.42 a barrel, while U.S. crude futures ended 29 cents, or 0.27 percent, higher at $107.23 a barrel. <O/R>

Gold turned higher in late trading, managing a fourth straight day of gains. It last traded 0.64 percent higher at $1,343.50 an ounce as the dollar's losses grew. Gold has recovered more than $160 from a three-year low of $1,180.71 on June 28. <GOL/>

(Additional reporting by Angela Moon, Rodrigo Campos in New York, Richard Hubbard, Blaise Robinson and Jan Harvey in London; Editing by Dan Grebler)

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Comments (2)
China is in gold buying frenzy. Physical deliveries at Shanghai Gold Exchange this year were 1200 tons, imports from Hongkong 500+ tons. They also have domestic production of 400 tons. Public can’t buy such amounts of gold for jewellery and investment. Only 1H 2013 apparent consumption will be enough to buy 2 rings to every Chinese lady. PBOC is buying in a diversification out of USD and EUR assets. With 3,4 trillion reserves, 10% diversification means 8000 tons (or 260 million oz if you don’t like metric system).
The next step will be change of reserve currency from USD to RMB, not now, but in 10-15 years.
I like US dollar, we can live with US hegemony, it is only 300 million people with insatiable resources demand. We do not know what insatiable resources demand of 1400 milion means.

FED can choose when to taper and everybody is listening, but sometimes around 2020 nobody would care so at maximum 10 years of zero interests rates fantasy.

Jul 23, 2013 4:34am EDT  --  Report as abuse
MikeBarnett wrote:
China claims that it will keep its growth target at 7.5%, and its GDP growth for the first half of 2013 is at 7.6%. In the current and next 5 year plans from 2011 to 2020, China will develop the center, north, and west as it has done for the eastern and southern provinces that lie near the coasts. China’s total foreign trade rose 8.6% in the first half of 2013; exports rose 10.4%; and imports rose 6.7%. This has happened while the EU, China’s biggest trade partner is in recession with negative growth, and the US, its 2nd biggest trade partners struggles. Fortunately, China’s trade with ASEAN, its 3rd biggest partner, rose 12.2% in the 1st half of 2013, and the numbers for Africa, its 4th biggest partner, should be similary good. China has made a point of increasing trade with developing nations to create a cushion when the major powers suffer economically.

Jul 23, 2013 7:59pm EDT  --  Report as abuse
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