Money News

World stocks, dollar cheered by brighter economic data, US earnings

LONDON (Reuters) - Global stocks steadied around six-year peaks and the dollar rose on Thursday, held aloft by robust data from Europe, the United States and Japan as well as upbeat corporate earnings.

European car sales posted their strongest gain in four years in December, while in Japan core machinery orders jumped in November, a sign companies may be ready to ramp up investment and increase wages.

Sentiment has also been lifted in the past day by data showing manufacturing in New York state hit a 20-month high this month, one of the first glimpses of U.S. economic activity this year.

That has helped the dollar regain some of its swagger after being battered by the surprisingly weak U.S. non-farm payroll report at the end of last week.

The Federal Reserve said in its Beige Book published late on Wednesday that the world’s biggest economy continued to grow at a moderate pace late last year, and some regions expected a pick-up in growth.

Thursday’s data is expected to feature a fall in weekly U.S. jobless claims.

The dollar rose 0.2 percent to 104.72 yen, adding to a 0.3 percent rise overnight and bouncing back from a four-week low of 102.85 set on Monday.

Economic optimism weighed on safe-haven gold prices - which edged lower for a third day in a row - but benefited equities. The MSCI all-country world index .MIWD00000PUS held firm at 407.17 points, just 1.38 points below a six-year high.

The MSCI world index, which strips out the recently weak emerging markets, rose as high as 1,661.33 points, a level not seen since November 2007.

“For the first time in a while, the global economic recovery is driven by developed countries, and central banks remain very accommodative. All in all, the environment is favourable to risky assets,” said Pascal Voisin, chief executive officer of Natixis Asset Management, which has 292 billion euros under management.

The Standard & Poor's 500 climbed to an all-time closing high on Wednesday on the back of the economic data and strong quarterly earnings from Bank of America BAC.N.

The onus on Thursday's earnings reports - which include American Express, Blackrock, Citigroup, Goldman Sachs and Intel INTC.O - is to back up the relatively upbeat picture so far.


Only around 5 percent of S&P 500 companies have already reported fourth quarter earnings, but on average they are beating consensus by 1.4 percent, according to StarMine data. That does, however, mark some discrepancy between sectors.

“The interesting thing to note is that the worst (U.S.) sector for revenue and earnings misses has been the retail sector, which has accounted for about half of the earnings disappointments thus far,” Jim Reid, strategist at Deutsche Bank, said in a note.

In Europe, too, consumer stocks have proved the weak spot, with Dutch grocer Ahold AHLN.AS and Swiss watch and jewellery marker Richemont CFR.VX both missing quarterly sales expectations. Their shares fell 3.5 and 1.9 percent respectively, keeping the pan-European FTSEurofirst 300 index below recent 5-1/2 year highs.

Overall, though, sentiment on the region remained upbeat. Peripheral euro zone bond prices extended their rally with expectations of a pick-up in global growth likely to increase the demand from overseas for higher-yielding euro zone bonds.

Underscoring such demand, Spain sold more debt than planned at a triple bond auction on Thursday.

Global economic optimism, however, failed to lift oil prices, with Brent crude falling below $107 a barrel on expectations of more supply from the Middle East and North Africa.

Additional Reporting by Dominic Lau in Tokyo, Blaise Robinson in Paris and Emelia Sithole-Matarise in London; Editing by Jeremy Gaunt and Susan Fenton