Sunday, December 25, 2011

GLOBAL MARKETS-U.S. economy hopes boost stocks, oil

Larger Smaller Reset NEW YORK (Dec 23): Wall Street stocks rose Friday and oil prices edged up as upbeat data reinforced a slightly better outlook for the U.S. economy, curbing a bid for safe-haven U.S. Treasury debt.

The euro was little changed, but was expected to face further weakness. Euro zone governments face large refinancing needs in early 2012, and investors say the region's leaders have not made much progress in dealing with their fiscal problems.

U.S. economic data Friday was mixed, with consumer spending growth tepid and a gauge of business investment down for a second month. But there were new signs of improvement in the housing market, and there have been signs in recent weeks that the economy is improving .

"The data itself has been modestly stronger in the fourth quarter, but nothing that changes the baseline slow-growth story," said Andrew Slimmon, managing director, Global Investment Solutions of Morgan Stanley Smith Barney in Chicago.

This cautious outlook could keep stocks and other growth-oriented assets from appreciating much above current levels.

"Ultimately I'm not looking for a risk-positive first quarter. The growth picture is too troubling," said Brian Dolan, chief currency strategist, at in Bedminster, New Jersey.

The Dow Jones industrial average ended up 124.35 points, or 1.02 percent, at 12,294.00. The Standard & Poor's 500 Index closed up 11.33 points, or 0.90 percent, at 1,265.33. The Nasdaq Composite Index finished up 19.19 points, or 0.74 percent, at 2,618.64.

The S&P finished up 3.7 percent for the week, breaking above its 200-day moving average and bringing its year-to-date result into positive territory. The Dow was up 3.6 percent on the week, and the Nasdaq closed up 2.5 percent on the week.

MSCI's world equity index rose 0.6 percent, but was on track to finish down 7.7 percent for the year.

The pan-European FTSEurofirst 300 index closed up 0.8 percent to its highest level in two weeks, though volume was far below average in advance of the Christmas holiday. The index ended up 3.5 percent for the week, paring its year-to-date loss to 12 percent.

The Japanese market was closed on Friday for a holiday.

U.S., European and some Asian markets will be closed Monday for the Christmas holiday.

Also Friday, the U.S. Congress, after months of fierce bickering between the two major political parties, approved a two-month extension of a payroll tax cut that President Barack Obama argued is vital to the health of the economy as unemployment remains high.

The extension of the tax cut will preserve income for most Americans, supporting their purchases of goods and services.

A Wall Street Journal report published late Thursday that the Federal Reserve could leave interest rates near zero for longer than it has already said also fanned hopes of faster U.S. growth and higher corporate profits.

The U.S. central bank has previously said it would probably leave rates unchanged until at least the middle of 2013, and officials are considering offering interest rate forecasts that could suggest the Fed will keep rates on hold for longer.

Despite some encouraging signs from the world's biggest economy, the festering euro zone debt crisis has reined in investor enthusiasm for stocks, the euro and commodities.

The euro was flat against the U.S. dollar at $1.3042 in light, choppy trading. The 17-nation common currency erased earlier losses and held above a recent 11-month low of $1.2945.

In a sign that the euro zone debt crisis is far from over, the yield on 10-year Italian government debt was just a touch below 7 percent, while the yield on 10-year Spanish sovereign debt was at 5.40 percent. If those yield levels persist, they are seen as crippling for the euro zone's third- and fourth-biggest economies, given Italy's and Spain's heavy debt loads.

U.S. crude futures settled up 15 cents at $99.68 a barrel, while the February Brent contract in London ended up 7 cents at $107.96, erasing earlier losses.

For the week, spot U.S. crude and London Brent futures were up 0.35 percent and 5.5 percent, respectively.

Spot gold prices edged up 0.1 percent at $1,605.70 an ounce and closed up 0.5 percent for the week after losing 8.4 percent over the previous two weeks.

As the demand for riskier investments rose, investors pared holdings of safe-haven U.S. and German government bonds.

German Bund futures were down 0.2 percent on the day at 137.56, ending 0.2 percent lower on the week.

The yield on benchmark 10-year U.S. Treasury note rose 7 basis points to 2.02 percent, its highest close in two weeks.

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