Global equity markets rose and the dollar strengthened yesterday on encouraging jobs data from Germany and news of the lowest US trade deficit in four years, the latest evidence of a more robust American economy.
The US Commerce Department said the trade gap fell 12.9 per cent to $34.3 billion in November, the smallest deficit since October 2009. October’s trade shortfall was revised down to $39.3 billion from a previously reported $40.6 billion.
The bigger-than-expected decline – economists polled by Reuters forecast November’s trade deficit would slip to $40 billion – could spur higher fourth-quarter growth estimates.
In Europe, an unexpected fall in German unemployment last month on a seasonally adjusted basis was the first drop since July.
The decline bolstered hopes domestic consumption could boost growth in Europe’s biggest economy. Investors also welcomed a successful Irish debt sale, the government’s first since the country exited an international bailout in December, as an indication Europe’s battered periphery was on the road to recovery.
European equity indexes rose to five-and-a-half-year highs, led by heavy trade in Spain.
The upbeat trade data helped turn sentiment in US equity markets after a slow start to the year, building on a record flow of investment to stocks and related securities in 2013.
“Today we had some good news again so this momentum building up for the last five years is going to continue to pull the market higher,” said Uri Landesman, president of Platinum Partners, a New York-based multi-strategy hedge fund.
“People realise how much the market has been up, so there’s the desire to take profits,” he said, adding that it is offset by “incredible upward momentum”.
US-listed equity mutual funds and exchange-traded funds took in a record $352 billion in 2013, topping a previous record $324 billion in 2000, according to TrimTabs Investment Research.
MSCI’s all-country world stock index rose 0.29 per cent, while the FTSEurofirst 300 index of top European shares gained 0.8 per cent to 1,319.74, its highest closing level since mid-2008.
Spain’s IBEX index surged 2.9 per cent on volume that was more than double an average session.
The benchmark S&P 500 was on track for the first gain of the new year.
The Dow Jones industrial average rose 93.48 points, or 0.57 per cent, at 16,518.58. The Standard & Poor’s 500 Index was up 8.17 points, or 0.45 per cent, at 1,834.94. The Nasdaq Composite Index was up 26.63 points, or 0.65 per cent, at 4,140.31.
All 10 S&P sectors rose on the day, led by healthcare , after Deutsche Bank upgraded UnitedHealth Group Inc to “buy.”
Shares of UnitedHealth, a Dow component, jumped 3.8 per cent to $77.08, while Tenet Healthcare climbed 3.87 per cent to $45.66, one of the S&P’s biggest percentage gainers.
The dollar gained, buoyed by the US trade data. Stronger growth could prompt the Federal Reserve to speed up the tapering of its monthly bond purchases.
However, Eric Rosengren, president of the Federal Reserve Bank of Boston, said low inflation keeps the US economy vulnerable and he reiterated a warning that policy stimulus should be removed “only gradually.” Rosengren is one of the most dovish of US central bankers.
The dollar traded 0.27 per cent higher at 104.49 yen, but remained below a five-year peak of 105.44 yen set last week. The euro was last down 0.09 per cent at $1.3615.
The dollar index, which tracks the greenback against a basket of six major currencies, was up 0.22 per cent at 80.830 .
Brent oil rose above $107 a barrel after five straight declines, supported by doubts about a recovery in Libyan output, fighting in Iraq and as cold weather across the central United States threatened production. Brent crude was up 60 cents to $107.33, after settling lower in the previous five sessions, partly on expectations of rising Libyan exports. US crude was 28 cents higher at $93.71.