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NEW YORK (Reuters) - World stocks rose to 10-month highs on Tuesday after Ben Bernanke was nominated for a second term as Federal Reserve chief and as upbeat U.S. economic data bolstered optimism, but crude oil sold off on profit taking.
The U.S. dollar slipped against the euro and yen as the data and Bernanke's nomination led investors to seek out higher-yielding currencies and assets.
U.S. Treasury debt prices edged higher as decent demand at an auction of two-year notes appeared to bode well for auctions of government debt later in the week.
Volume was light in many markets, leading to seemingly out of sync price movements, such as bond investors shrugging off the solid economic news to bid bonds higher.
Oil, which has closely hugged equity movements during the monthslong rally, turned lower as traders said crude's more than 65 percent gain this year was reason to lock in profits.
Copper prices also settled lower as investors booked profits and took to the sidelines amid worries about over-heated prices and slowing Chinese demand.
Investors in equity markets cheered a report that showed consumer confidence increased more than expected in August, while the S&P/Case-Shiller home price index rose in June for a second straight month.
Rebounding home prices, as well as stronger consumer spending, are seen as critical for the U.S. economy to bounce back from its worst recession since the Great Depression.
"These numbers are definitely reassuring, though I'm more focused on the housing data. Still, the consumer confidence is like gravy today," said Melvin Harris, market strategist, at Advanced Currency Markets in New York.
"We're not in full-blown recovery mode yet but we are seeing more normalized markets. Consumer numbers are important numbers -- they are an indicator of what people are willing to spend and that matters for GDP growth."
MSCI's all-country world index .MIWD00000PUS, among other major U.S. and European indexes, set new 10-month highs. The MSCI index pared earlier gains to be ahead 0.1 percent.
Financial shares were among the top gainers, with the S&P financial index .GSPF rising 1.1 percent.
The Dow Jones industrial average .DJI closed up 30.01 points, or 0.32 percent, to 9,539.29. The Standard & Poor's 500 Index .SPX rose 2.43 points, or 0.24 percent, to 1,028.00. The Nasdaq Composite Index .IXIC climbed 6.25 points, or 0.31 percent, to 2,024.23.
After shooting up in early trade to almost 1.0 percent gains, equity prices slipped, while bond prices rebounded and the dollar pulled off session lows.
U.S. crude oil dropped $2.32 to settle at $72.05 a barrel, down from a high of $75, in the biggest percentage loss since August 14. Brent crude dropped $2.44 to $71.82.
U.S. gold futures ended slightly higher as the dollar edged down against the euro, but bullion trimmed initial gains ahead of upcoming metal option expirations.
The December gold contract settled up $2.30 at $946 an ounce in New York.
In Europe, regional shares hit their highest close since October on the U.S. data, with energy companies and banks rebounding from earlier losses.
The pan-European FTSEurofirst 300 .FTEU3 index of top shares closed up 0.4 percent at 978.76.
The euro was up 0.1 percent at $1.4308 after earlier hitting $1.4361, while the dollar slipped 0.4 percent to 94.13 yen. Sterling fell 0.4 percent to $1.6351.
Nagging doubts over the strength of a global recovery, together with mortgage-related hedging, helped mitigate early losses in U.S. bonds, analysts said. Bonds later rose.
The benchmark 10-year U.S. Treasury note was up 10/32 in price to yield 3.44 percent.
Asian shares and commodities slipped in a partial reversal of the previous day's solid gains. MSCI's index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.6 percent, while Japan's Nikkei average .N225 shed 0.8 percent.
Reporting by Richard Valdmanis, Rodrigo Campos, Steven C. Johnson and Burton Frierson in New York; Ian Chua and Joanne Frearson in London; writing by Herbert Lash