GLOBAL MARKETS-Wall Street holds near record high, yuan weaker

Tue Feb 25, 2014 12:53pm EST

* Yuan drops most in more than six years after PBOC moves

* Wall St holds near record highs

* U.S data boosts gold prices

By Chuck Mikolajczak

NEW YORK, Feb 25 (Reuters) - Stocks on major world markets edged higher on Tuesday, holding near six-year highs as investors shrugged off mixed U.S. economic data, while the U.S. dollar rose against the yuan on suspicion China's central bank intervened in the currency market.

Wall Street's benchmark S&P 500 was near record highs, while MSCI's all world index, which tracks stocks in 45 countries, was in positive territory for the 13th session in 15 and at its highest level since December 2007.

Recent data has fostered concerns about the strength of the U.S. economy, though equities investors seem inclined to believe the severe winter weather is a large part of the weakness. The S&P/Case-Shiller index showed home prices rose slightly more than expected in December, though February consumer confidence fell short of expectations.

"We're not being aggressive, since valuations aren't spectacular here, but this certainly isn't a time to run to cash," said Rex Macey, chief investment officer at Wilmington Trust in Atlanta, Georgia. "We expect we'll take two steps forward and one step back for a while."

Uncertainty over China has stoked worries about a faster-than-projected slowdown in its massive economy, dovetailing with political worries in other big emerging markets like Ukraine, Thailand, Nigeria and Turkey.

A hefty $38 billion has been pulled out of emerging markets over the last 17 weeks and $44.2 billion has flowed into developed market equity funds since the start of the year.

The yuan continued several weeks of weakness, guided by a series of moves by the central bank aimed at instilling caution in those who for years have been betting on its rise versus other major currencies.

Tuesday brought a significant acceleration in the move. The yuan's sharpest drop since December 2008 extended its fall in the past week to slightly over 1 percent, amid talk the People's Bank of China had been discreetly intervening in the spot market.

China allows the yuan to move 1 percent above or below a midpoint set daily, but experts believe the recent depreciation is intended to set the stage for a widening of that band to 2 percent or more this year to make it more free moving.

In Europe, the pan-regional FTSEurofirst 300 was off 0.02 percent.

The euro and benchmark German government bonds kept to tight recent ranges, with little impact from new European Commission forecasts that slightly increased its growth estimate for the euro zone to 1.2 percent in 2014, with a further 1.8 percent expansion next year.

Inflation was seen at 1 percent this year and 1.3 percent in 2015, still well short of the European Central Bank's target of just below 2 percent. The ECB meets early next month and will be armed with its own in-house forecasts.

Goldman Sachs pushed back its prediction of a rate cut until April, although it did not rule out a move by the ECB to keep money market liquidity topped up by ending its weekly 'sterilization' of past government bond purchases.

The Dow Jones industrial average rose 14.93 points, or 0.09 percent, at 16,222.07. The Standard & Poor's 500 Index was up 0.86 points, or 0.05 percent, at 1,848.47. The Nasdaq Composite Index was down 1.63 points, or 0.04 percent, at 4,291.34.

U.S. Treasuries, the benchmark for global borrowing costs, rose 12/32 in price on the benchmark 10-year note to yield 2.705 percent.

Gold prices have pushed to their highest level in four months. Spot gold hit its highest since Oct. 30 at $1,342.81 an ounce and was trading up 0.4 percent at $1,342.35 an ounce.

Oil prices faded just a little, with Brent crude at $109.81 a barrel and U.S. oil at $101.59, weighed down by forecasts of rising U.S. crude inventories as icy weather eases.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.