NEW YORK: World stocks surged to a five-month high and the U.S. dollar fell broadly on Tuesday, Oct 5 ( after the Bank of Japan unexpectedly cut interest rates, fueling speculation that other governments will take additional actions to reinvigorate the global economic recovery.
Gold hit yet another record high above $1,340 an ounce, while copper rose to its highest since July 2008 and oil rose to a five-month high as the dollar, driven by investor concern over the outlook for global growth, weakened further.
Risk assets soared on encouraging U.S. services sector data, the BOJ's rate cut and the Reserve Bank of Australia's decision not to raise rates, raising investor hopes that cheap money will flood global economies. The Federal Reserve has suggested it may engage in further quantitative easing unless the U.S. economic outlook improves.
"The thinking today is that the printing of money is going to take place," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
"The short-term impact of that is to drive asset prices higher. We've seen it almost across the board in commodities."
The BOJ's measures -- cutting its overnight rate target to virtually zero and pledging to buy 5 trillion yen ($60 billion) worth of assets -- pushed the Nikkei average to close 1.5 percent higher. The December futures contract for the Nikkei 225 stock index trading in Chicago rose 280 points to 9,630.
Tokyo's action came after Fed Chairman Ben Bernanke said on Monday that more asset purchases could further ease financial conditions and help the economy.
The euro jumped to its highest since February against the dollar on concerns that further U.S. quantitative easing could undermine dollar strength.
A U.S. equities rally was fueled further by data showing the pace of growth in the U.S. services sector, which accounts for 80 percent of U.S. jobs, accelerated last month more quickly than economists had expected, while hiring also picked up.
The Dow Jones industrial average closed up 193.45 points, or 1.80 percent, at 10,944.72. The Standard & Poor's 500 Index rose 23.72 points, or 2.09 percent, to 1,160.75, the highest level since mid-May. The Nasdaq Composite Index gained 55.31 points, or 2.36 percent, to 2,399.83.
"Given unemployment and the state of the housing market, central banks didn't have a choice but to take steps like this, and it's what the market wanted to see," said Uri Landesman, president of New York-based Platinum Partners. "This could be a sign of things to come."
The pan-European FTSEurofirst 300 index of top European shares closed up 1.4 percent at 1,066.12.
World stocks measured by the MSCI All-Country World Indexrose 1.82 percent, its highest level since the end of April, while the Thomson Reuters global equity index rose 0.23 percent.
DOLLAR'S LOSS
In currencies, the dollar index was down against major currencies, falling 0.77 percent to 77.834. The euro was up 1.10 percent at $1.3832 after climbing as high as 1.3860, an eight-month high. Against the Japanese yen, the dollar was down 0.17 percent at 83.20 after dipping as low as 82.96 yen on electronic trading platform EBS.
The prospect of further quantitative easing from the Fed modestly supported U.S. Treasury prices.
The benchmark 10-year U.S. Treasury note was up 2/32, its yield at 2.4722 percent. The 2-year U.S. Treasury note was up 1/32, with the yield at 0.4067 percent. The 30-year U.S. Treasury bond was down 19/32, with the yield at 3.7403 percent.
The Australian dollar fell 0.9 percent to $0.9594 after the central bank left interest rates steady for a fifth month, confounding expectations of a rise.
Some analysts said the Australian dollar's recent strength might have given the Reserve Bank of Australia reason to pause, while speculation of U.S. and British quantitative easing may have made it cautious.
Central banks in Japan, the United States and Britain have been under political pressure to do more to support economies showing only tepid recovery from the worst recession in decades.
In Japan, slowing export growth, a surprise fall in factory output and companies' worries about the strong yen have strengthened the case for the BOJ to ease policy. Last month authorities intervened in the currency market to curb the yen's strength.
The U.S. currency has fallen 10 percent this year against the yen.
Governments' ultra loose monetary policies may debase the value of currencies and are leading to continued demand for gold and the rise of other commodities.
Gold climbed higher on concern about more monetary easing and possibly higher long-term inflation. The precious metal hit another record high bid at $1,341.20 an ounce. Oil prices rose more than 1 percent to $82.82 a barrel and copper rose to $8,229 per tonne, its highest in two years. Tin rose to an all-time high at $26,010 a tonne, while platinum, aluminum, zinc, lead and nickel touched multi-month highs. - Reuters
Gold hit yet another record high above $1,340 an ounce, while copper rose to its highest since July 2008 and oil rose to a five-month high as the dollar, driven by investor concern over the outlook for global growth, weakened further.
Risk assets soared on encouraging U.S. services sector data, the BOJ's rate cut and the Reserve Bank of Australia's decision not to raise rates, raising investor hopes that cheap money will flood global economies. The Federal Reserve has suggested it may engage in further quantitative easing unless the U.S. economic outlook improves.
"The thinking today is that the printing of money is going to take place," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
"The short-term impact of that is to drive asset prices higher. We've seen it almost across the board in commodities."
The BOJ's measures -- cutting its overnight rate target to virtually zero and pledging to buy 5 trillion yen ($60 billion) worth of assets -- pushed the Nikkei average to close 1.5 percent higher. The December futures contract for the Nikkei 225 stock index trading in Chicago rose 280 points to 9,630.
Tokyo's action came after Fed Chairman Ben Bernanke said on Monday that more asset purchases could further ease financial conditions and help the economy.
The euro jumped to its highest since February against the dollar on concerns that further U.S. quantitative easing could undermine dollar strength.
A U.S. equities rally was fueled further by data showing the pace of growth in the U.S. services sector, which accounts for 80 percent of U.S. jobs, accelerated last month more quickly than economists had expected, while hiring also picked up.
The Dow Jones industrial average closed up 193.45 points, or 1.80 percent, at 10,944.72. The Standard & Poor's 500 Index rose 23.72 points, or 2.09 percent, to 1,160.75, the highest level since mid-May. The Nasdaq Composite Index gained 55.31 points, or 2.36 percent, to 2,399.83.
"Given unemployment and the state of the housing market, central banks didn't have a choice but to take steps like this, and it's what the market wanted to see," said Uri Landesman, president of New York-based Platinum Partners. "This could be a sign of things to come."
The pan-European FTSEurofirst 300 index of top European shares closed up 1.4 percent at 1,066.12.
World stocks measured by the MSCI All-Country World Indexrose 1.82 percent, its highest level since the end of April, while the Thomson Reuters global equity index rose 0.23 percent.
DOLLAR'S LOSS
In currencies, the dollar index was down against major currencies, falling 0.77 percent to 77.834. The euro was up 1.10 percent at $1.3832 after climbing as high as 1.3860, an eight-month high. Against the Japanese yen, the dollar was down 0.17 percent at 83.20 after dipping as low as 82.96 yen on electronic trading platform EBS.
The prospect of further quantitative easing from the Fed modestly supported U.S. Treasury prices.
The benchmark 10-year U.S. Treasury note was up 2/32, its yield at 2.4722 percent. The 2-year U.S. Treasury note was up 1/32, with the yield at 0.4067 percent. The 30-year U.S. Treasury bond was down 19/32, with the yield at 3.7403 percent.
The Australian dollar fell 0.9 percent to $0.9594 after the central bank left interest rates steady for a fifth month, confounding expectations of a rise.
Some analysts said the Australian dollar's recent strength might have given the Reserve Bank of Australia reason to pause, while speculation of U.S. and British quantitative easing may have made it cautious.
Central banks in Japan, the United States and Britain have been under political pressure to do more to support economies showing only tepid recovery from the worst recession in decades.
In Japan, slowing export growth, a surprise fall in factory output and companies' worries about the strong yen have strengthened the case for the BOJ to ease policy. Last month authorities intervened in the currency market to curb the yen's strength.
The U.S. currency has fallen 10 percent this year against the yen.
Governments' ultra loose monetary policies may debase the value of currencies and are leading to continued demand for gold and the rise of other commodities.
Gold climbed higher on concern about more monetary easing and possibly higher long-term inflation. The precious metal hit another record high bid at $1,341.20 an ounce. Oil prices rose more than 1 percent to $82.82 a barrel and copper rose to $8,229 per tonne, its highest in two years. Tin rose to an all-time high at $26,010 a tonne, while platinum, aluminum, zinc, lead and nickel touched multi-month highs. - Reuters
No comments:
Post a Comment