US stocks rose yesterday as the latest US economic data argued for continued central bank stimulus measures while higher confidence in the euro zone lifted European shares and the euro.
US GDP grew 2.4 per cent in the first quarter, slightly less than initially reported, a sign of pain from Washington’s austerity drive, and new claims for unemployment benefits rose in the latest week, the government said. Pending home sales rose 0.3 per cent in April, below expectations for a 1.1 per cent rise.
The dollar fell to a three-week low against the euro and erased all of its gains versus the yen after sources said Japan’s public pensions fund was considering allowing investment in domestic stocks to grow with a rallying market.
Earlier, Japan’s Nikkei share average dived 5.2 per cent yesterday on concerns about the Fed scaling back its stimulus program in the next few months.
US equities have been closely tethered to central bank policy, with shares tumbling on Wednesday as US Treasury bond yields rose to their highest level in more than a year on concerns the Federal Reserve would curb its bond-buying programme.
On Tuesday, reassurances from central banks around the world that programs would remain intact had boosted equity prices.
“Every time we get some sort of comment or article about a tapering off of the Federal Reserve’s bond purchases coming sooner rather than later, we get a little bit of volatility; but overall the stock market has been pretty resilient in the face of that discussion,” said Joe Bell, senior equity analyst at Schaeffer’s Investment Research in Cincinnati, Ohio.
The Dow Jones industrial average was up 65.27 points, or 0.43 per cent, at 15,368.07. The Standard & Poor’s 500 Index was up 9.75 points, or 0.59 per cent, at 1,658.11. The Nasdaq Composite Index was up 27.26 points, or 0.79 per cent, at 3,494.78.
As most global stock markets rose, safe-haven U.S. debt retreated before the Treasury’s seven-year note auction. Yields on Treasuries have surged this month as more upbeat sentiment about the economy prompted investors to sell bonds should the Fed pull back on its massive bond purchases.
The recent rise in yields may help the Treasury sell $29 billion in seven-year notes at 1700 GMT, the final sale of $99 billion in coupon-bearing debt this week. Strong demand emerged for a sale of $35 billion of five-year notes on Wednesday.
“Yesterday we had a real bid come back into the market. Now it looks like we’re going to gravitate to possibly higher prices but we do have to take this seven-year note out of the way,” said Tom Tucci, head of Treasuries trading at CIBC in New York.
Benchmark 10-year notes were last down 6/32 in price to yield 2.13 per cent. Those yields have surged from 1.61 per cent at the beginning of May and reached a 13-month high of 2.24 per cent in overnight trading on Wednesday. Top European stocks climbed 0.3 per cent as they steadied after heavy falls on Wednesday, but the drop in Japan’s Nikkei in Asian trading left MSCI’s world index at a three-week low.