The euro hit an 11-month high and global equity markets rose yesterday on signs of a healthier European financial system and a brighter outlook for Germany, while US stocks extended a rally to an eighth day.
Solid US corporate earnings and the strongest seasonal inflows into US stock mutual funds in a decade also helped lift Wall Street, and the S&P 500 topped the 1,500 mark for a second day in a row, a level last reached in late 2007.
News from Europe was also bullish. The European Central Bank said banks will repay €137 billion of crisis loans next week, handing back more cash earlier than expected in a sign that parts of the financial system are returning to health.
The repayments show financial strains are receding and “allowing investor risk appetite to rise. So you’re starting to see more interest in stocks than in bonds, less interest in safe-haven currencies, and just a general rise in risk appetite,” said David Joy, chief market strategist at Ameriprise Financial in Boston.
Global shares as measured by MSCI ’s all-country world equity index rose by 0.39 per cent to a new level of 354.56.
The Dow Jones industrial average was up 49.78 points, or 0.36 per cent, at 13,875.11. The Standard & Poor’s 500 Index was up 5.18 points, or 0.35 per cent, at 1,500.00. The Nasdaq Composite Index was up 12.59 points, or 0.40 per cent, at 3,142.97.
European shares scaled fresh multi-month peaks on the bigger-than-expected loans paybacks and after the closely watched Ifo business morale index beat consensus estimates for January to match the most optimistic economist’s forecast.
Frankfurt’s DAX index led the rally, scaling five-year highs and closing 1.4 per cent higher.
The FTSEurofirst 300 index of pan-European shares closed 0.32 per cent higher at 1,174.81 points, while German bond futures fell by 76 ticks.
The euro hit $1.3471, its highest since February 2012, to extend gains following the release of data showing the German economy gathering speed again after contracting late last year. The euro last traded up 0.64 per cent at $1.3459.
Oil prices rose above $113 a barrel as robust economic data from the United States, China and Germany lifted the outlook for global fuel demand. Brent crude rose 13 cents to $113.41 a barrel. US crude fell 1c to $95.94.
US Treasury debt yields rose, with 30-year bonds trading a point lower in price after better-than-expected eurozone data spurred selling of safe-haven US government debt.
The benchmark 10-year US Treasury note was down 20/32 in price to yield 1.9237 per cent.