Stocks on Wall Street rebounded yesterday on renewed signs of solid growth and as US consumer sentiment hit a high last seen in 2004, while the euro slid further against the dollar in the wake of Switzerland’s move to ditch its currency cap.
Crude prices rallied more than three per cent after the West’s energy watchdog forecast the sell-off in oil would end, though analysts said a strong rebound was unlikely to occur soon as global output continued to outweigh demand.
The oil rout led US consumer prices to post their biggest decline in six years in December and an underlying gauge of inflation failed to rise, developments that could make the Federal Reserve more cautious about raising interest rates.
US stocks advanced after five straight sessions of losses for major indexes, while European shares rose on the notion that Switzerland’s move on Thursday to drop the franc’s cap was in anticipation of a likely European Central Bank bond-buying plan.
Dealers speculated the Swiss National Bank knew the ECB would take the plunge into full-scale quantitative easing, effectively printing of hundreds of billions of euros, at its policy meeting on January 22.
“It challenges the view that ECB easing is already in the price,” said Daragh Maher, a currency strategist at HSBC in London. “There is recognition now that maybe there wasn’t as much in the price as some claimed.”
The loss of Swiss support for the euro caused the single currency to slide to $1.1461, a trough not seen since November 2003. It last traded at $1.1498, down 1.12 per cent.
Global equity markets rebounded, with MSCI’s all-country world index gaining 0.17 per cent. The pan-European FTSEurofirst 300 index of leading regional companies rose 0.99 per cent to 1,407.18 points.
Stocks in Switzerland again sank on concerns the SNB’s surprise currency move will spark a wave of profit warnings from Swiss multinationals that rely heavily on export revenue.
Morgan Stanley estimated that 85 per cent of Swiss company sales come from abroad and many of the large-cap names generate up to 95 per cent of their revenue from outside the country.
The Swiss blue-chip index SMI was down six per cent.
The Dow Jones industrial average rose 44.86 points, or 0.26 per cent, to 17,365.57. The S&P 500 added 9.55 points, or 0.48 per cent, to 2,002.22 and the Nasdaq Composite gained 23.39 points, or 0.51 per cent, to 4,594.21.
US Treasuries prices fell to session lows after a private report on American consumer sentiment in early January reduced worries about domestic growth, sparking the selling of safe-haven holdings in US government debt.
rent crude futures for March delivery jumped to a high of $50.25, before easing a bit to trade 87 cents higher at $49.14 a barrel. US crude traded at $47.36 a barrel, up $1.11 a barrel.