World equity indexes up on U.S. data, ECB hopes; gold slumps

NEW YORK, Tue May 27, 2014 4:45pm EDT

1 of 3. A man is reflected on an electronic stock quotation board outside a brokerage in Tokyo May 16, 2014.

Credit: Reuters/Yuya Shino

NEW YORK, (Reuters) - World equity markets rallied on Tuesday, with the S&P 500 ending at a new record following strong U.S. economic data, while the euro softened against the dollar on expectations of more rate cuts from the European Central Bank.

Stronger-than-expected figures pressured safe-haven assets, including gold, which touched a 3-1/2 month low. Platinum also fell after South Africa's mining minister pledged to mediate in a long-running strike.

Wall Street was led by gains in financials, utilities and tech stocks. Data showed orders for long-lasting U.S. manufactured goods unexpectedly rose in April while U.S. single-family home prices also rose in March, beating expectations.

"People move out of one sector and into a different equity sector - there's always a sector picking up the slack, so that’s driving you higher," said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas. "People don't want to be out of equities."

The Dow Jones industrial average rose 69.23 points, or 0.42 percent, to 16,675.5, the S&P 500 gained 11.38 points, or 0.6 percent, to 1,911.91 and the Nasdaq Composite added 51.26 points, or 1.22 percent, to 4,237.07.

ECB chief Mario Draghi on Monday bolstered views that the bank will cut euro zone interest rates again next week, boosting appetite for risky assets. Other policymakers, including Austrian ECB board member Ewald Nowotny, drove home the message on Tuesday.

MSCI's all-world share index rose 0.2 percent to within two percentage points of its 2007 record.

Investors kept a wary eye on Ukraine, which launched air strikes and a paratroop assault against pro-Russian rebels who seized an airport on Monday. The escalation was tempered by a decisive win for billionaire Petro Poroshenko in Ukraine's weekend presidential election, which many hope will help stabilize the situation.

U.S. Treasury prices inched lower. The 10-year note fell 3/32 in price to yield 2.522 percent. The 30-year bond rose 19/32 to drop its yield to 3.365 percent, but light volume and the presence of month-end buying reduced the significance of the move.

The euro lost ground against the greenback on the better-than-expected U.S. data. The euro fell 0.1 percent to $1.3635, nearly touching Monday's three-month low of $1.3614. The dollar index slipped 0.05 percent.

GOLD SLUMPS

Spot gold fell 1.9 percent at $1,264.80 an ounce, its worst daily loss in two months. U.S. gold futures GCcv1 dropped 2 percent to $1,265.40 an ounce.

Platinum fell 1 percent to $1,456.20 after South Africa's mining minister pledged to mediate in a strike now in its fifth month. The metal reached its highest since September at $1,493.90 last week.

Global oil prices fell. Brent LCOc1 was down 26 cents at $111.06 a barrel and U.S. light crude oil CLc1 was down 22 cents at $104.13.

(Reporting by Angela Moon; Editing by Dan Grebler)

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Comments (4)
Brianach wrote:
Bubble bubble toil and trouble.

May 27, 2014 7:40am EDT  --  Report as abuse
divinargant wrote:
This is of the highest priority of central planning. If it were truly based on the fundamentals say as it used to be many many years ago, it would likely look a lot different. But when price discovery is taken away and who knows what asset prices would truly be if there were free market price discovery taking place without central intervention..well this is what you get. Oh it looks great..the problem is that it is fake and that typically doesn’t last forever. Like one of the comments often seen on this site so aptly writes..tick..tock..tick..tock…for it is only a matter of time before all this goes into reverse mode.

May 27, 2014 8:29am EDT  --  Report as abuse
Piketty is correct, according to the IMF.
Banking reforms aimed at preventing another financial crisis have failed to make enough progress, the boss of the International Monetary Fund has warned, says a BBC story today.
IMF managing director Christine Lagarde blamed a combination of the complexity involved, industry lobbying and “fatigue” for the delay.
“The industry still prizes short-term profit over long-term prudence,” Ms Lagarde said at a conference on the future of capitalism.
Speaking to the BBC, Ms Lagarde noted that inequality was rising.
“To the extent that inequality is not particularly supportive of sustainable growth, it’s an issue and one that we have to look at carefully and try to address in order to maintain stability and sustainability of economies,” she said.
In her speech to the Inclusive Capitalism conference, she recommended income and property tax changes to reduce inequality, attacked the financial sector for not changing its behaviour quickly enough and said that inequality in the UK was at levels not seen for almost a century.
It was highly political, quoting Pope Francis, John F Kennedy and Winston Churchill.
Capitalism needs to change its ways, she said.
In her speech, Ms Lagarde said some of the biggest problems were with the so-called “too-big-to-fail firms”, banks whose collapse would cause such a big knock-on effect on the wider economy that governments were still expected to rescue them.
She said a recent IMF study indicated that such banks were still “major sources of systemic risk” and called for “tougher regulation and tighter supervision” to tackle the issue.
“Their implicit subsidy is still going strongly – amounting to about $70bn (£41.5bn) in the US, and up to $300bn in the euro area,” she said.
Ms Lagarde called for regulators worldwide to agree a framework to wind down big banks in trouble, as well as mutual recognition on rules for financial markets.
“This is a gaping hole in the financial architecture right now, and it calls for countries to put the global good of financial stability ahead of their parochial concerns,” she said.

May 27, 2014 11:04am EDT  --  Report as abuse
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