The dollar recovered from early losses and global equity markets rose yesterday after better-than-expected government reports on the US economy and strong consumer confidence data gave investors a reprieve about worries over Federal Reserve policy.
Orders for durable goods rose more than expected in May and a gauge of planned business spending gained for a third straight month, while existing single-family home prices posted their biggest rise in seven years in April.
In another better-than-expected report, the Conference Board’s US consumer confidence index rose in June to 81.4 from a downwardly revised 74.3 in the prior month, the private business research group reported.
At first blush, the data would be seen as bullish as the economy is improving. But that suggests the Fed can move forward with plans to ease its bond-buying program. Fears of such a move have led bond yields to jump and stocks to drop in recent days.
“The market trend has turned to the downside. It is now easier to sell rallies than to buy dips, so strategies have flipped,” said Donald Selkin, chief market strategist at National Securities in New York, which has about $3 billion in assets under management.
Global markets tracked by MSCI’s all-country world equity index were up 0.66 per cent, while the FTSEurofirst 300 index of leading European companies rose 1.36 per cent, recovering some of the 5.5 per cent it lost in the previous three trading days.
The Dow Jones industrial average was up 92.54 points, or 0.63 per cent, at 14,752.10. The Standard & Poor’s 500 Index was up 11.26 points, or 0.72 per cent, at 1,584.35. The Nasdaq Composite Index was up 15.56 points, or 0.47 per cent, at 3,336.31.
The pause in the market’s recent rout began when two Fed policymakers on Monday downplayed the notion of an imminent end to the central bank’s money-printing and said the market reaction was not yet a cause for concern.
Asian markets then capped a day of wild swings, during which Chinese stocks plunged to their lowest since the global financial crisis began, with a late rally on hopes authorities in China would step in toprevent a crisis.
China’s central bank fueled the talk at a news briefing where it sought to allay fears of a credit squeeze by committing to guide interest rates to “reasonable” levels after they had been allowed to spike over the past week.
The dollar extended gains against the yen and euro yesterday after data showed sales of new US single-family homes rose to their highest in nearly five years in May, confirming the housing market’s strengthening tone.
The dollar rose against the yen to 97.76 yen from about 97.61 yen before the data, up 0.04 per cent on the day.
The euro fell to the session low of $1.3066 where it traded before the data. It was trading at 1.3072, down 0.34 per cent.
Prices of US Treasuries edged down slightly in choppy trade, while German Bund futures pared their early gains on news of the manufacturing data.
The benchmark 10-year US Treasury note was down 11/32 in price to yield 2.5838 per cent.
Bund futures traded at 140.50, up 19 ticks from Monday’s close, having risen as high as 141.01 before the data.
Oil was above $101 a barrel, rebounding from a three-week low, as investor concern eased about a liquidity crunch in China and as Canadian pipeline closures threatened exports to the United States.
Brent crude rose 54 cents to $101.70 a barrel. US oil rose 36 cents to $95.54.
“Stock markets are up and commodity prices are up across the board,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt, adding that the Chinese officials’ comments had prompted a change in market sentiment.