* Central banks expected to extend easy money policies
* Brent climbs after 5-day slump, U.S. crude also up
* Copper gains as China pledges to maintain growth
By Rodrigo Campos
NEW YORK, March 5 The Dow Jones Industrial
Average closed at a historic high on Tuesday as major world
stock markets rallied after China pledged record government
spending to boost growth and data showed the U.S. service sector
expanding at its fastest pace in a year.
Crude oil and copper prices also advanced on China's pledge
to deliver growth of 7.5 percent this year in the world's
On Wall Street, the Dow surpassed the highs seen in 2007,
before the steepest U.S. recession in decades, breaking the Oct.
9, 2007 closing record of 14,164.53.
The index rose 125.95 points on Tuesday, or 0.89 percent, to
close at 14,253.77 points.
"Stocks are close to fair value, but very cheap relative to
the bond market and to cash, which is very expensive," said
David Kelly, managing director and chief market strategist at
JPMorgan Asset Management in New York.
"Central banks have been keeping rates low and that
justified higher stock prices. But we weren't seeing that
because of these risks. As these risks have diminished, money is
going into stocks because it has nowhere else to go. That led to
the new high on the Dow Jones Industrial Average today," he
After the peak in 2007, stock markets crashed as the U.S.
and Europe entered a deep recession. The rebound in U.S. equity
markets has been much stronger than in Europe. The United States
did not embrace the sharp government austerity measures that
have hindered economic growth in Europe, while added liquidity
from the Federal Reserve and historically low interest rates
have fueled investor appetites.
"Things that could really have gone wrong, like a blow-up in
Europe or a fiscal cliff in the United States, or a crash
landing in China, created an extreme disparity between stocks
and bonds and cash," Kelly added.
Even as the Dow hit a record high, its euro-zone peer, the
blue-chip Euro STOXX 50, still needs to gain more
than 70 percent to reach its June 2007 top.
An MSCI gauge of global equities rose 1.1
percent and the FTSEurofirst-300 index of top European shares
shot up 1.8 percent.
By the closing bell, the S&P 500 gained 14.59 points,
or 0.96 percent, to 1,539.79 and the Nasdaq Composite
added 42.1 points, or 1.32 percent, to 3,224.13.
In the oil market, Brent crude broke a five-day losing
streak as the North Sea Brent pipeline remained closed for a
third day and investors bet on strong Chinese oil demand.
Data showed the U.S. services sector accelerated at its
fastest pace in a year in February, further supporting oil.
Brent crude oil rose $1.52, or 1.4 percent, to settle at
$111.61 per barrel, while U.S. crude oil added 70 cents,
or 0.8 percent, to end at $90.82.
Copper prices rose 0.7 percent after top consumer China's
pledge to maintain economic growth at 7.5 percent. Three-month
copper rose to $7,772 a ton.
Demand for riskier assets has also been supported by
unprecedented liquidity injections by the world's major central
banks, and investors are seizing on any signs this will
Comments on Monday from the U.S. Federal Reserve's vice
chair, Janet Yellen, backing the current aggressive stimulus
effort, and a decision by Australia's Reserve Bank to keep
interest rates at record lows, were the latest signs that easy
monetary policies will remain in place.
The Bank of Japan, the Bank of England and the European
Central Bank are all expected either to keep current loose
policies in place or add extra stimulus after their policy
meetings this week.
The euro rose for a second day against the U.S. dollar while
commodity currencies such as the Australian and New Zealand
dollars also gained, as risk sentiment improved after the Dow's
"Clearly, the biggest story of the day was the Dow hitting a
record high, so that has lifted some of these riskier currencies
against the dollar," said Greg Moore, currency strategist, at TD
Securities in Toronto.
Prices of U.S. Treasuries fell, with yields on U.S.
government debt range-bound as investors looked to central bank
meetings and the U.S. payrolls report.
Yields were pressured slightly higher by the U.S. data.
The benchmark 10-year U.S. Treasury note fell
6/32 in price to yield 1.8978 percent, up from 1.8789 percent on
Spot gold prices edged higher, paring earlier gains
as demand for safe havens was sapped by the Dow record.
Gold was last up 0.1 percent at $1,575.36 an ounce, down
from a session high of $1,585.91.