By Javier Blas
Published: January 3 2011 18:52 | Last updated: January 3 2011 18:52
Published: January 3 2011 18:52 | Last updated: January 3 2011 18:52
Global equities and commodities markets rallied in the first session of the new year, boosted by robust manufacturing data.
Trading volumes were thin, however, and markets in the UK and Japan were among those closed for public holidays.
Trading volumes were thin, however, and markets in the UK and Japan were among those closed for public holidays.
Investors appeared confident that the equity rally of late 2010 would extend into the new year as economic growth, particularly in the US, gathered steam.
Economic data on Monday fuelled that optimism, with surveys pointing to robust growth in the manufacturing sector in the US, Europe and Asia.
The US Institute of Supply Management’s national factory activity index, a key gauge of economic growth, rose for the 17th successive month in December, according to data released on Monday. The index rose to 57 points last month, up from 56.6 in November.
“The takeaway here is that economic growth in the US economy looks sustained and there is no double-dip in the outlook,” said John E. Silvia, chief economist at US bank Wells Fargo. “In fact, economic growth is likely to be faster than the consensus view of 2.6 percent year-over-year growth in 2011.”
The news boosted US equity markets. In midday trading in New York, the S&P 500 was up 1.4 per cent, building on the best December for the index in nearly two decades.
The Dow Jones Industrial Average increased 1.1 per cent.
Financials led the indices higher, reversing the trend of last year, when the sector underperformed the wider US equity market.
In Asia, the renewed strength of the factory sectors in South Korea and Taiwan, combined with continued expansion in India and China and other signs of accelerating economic activity, could add to concern that inflation may be about to take off across the region.
However, manufacturing activity slowed somewhat in China and India, cheering equity investors worried about central banks there tightening monetary policy further. In Hong Kong, the Hang Seng index gained 1.7 per cent.
In Europe, equity markets rose on the back of strong manufacturing data, with France’s CAC 40 and Germany’s Dax indices posting strong gains. The FTSE Eurofirst 300 index of top European shares rose 1 per cent, with strong gains by construction, car manufacturers and industrial companies. The European index had risen 7.3 per cent in 2010.
Julian Callow, European economist at Barclays Capital, said the eurozone’s purchasing managers index provided “further evidence that, contrary to the tensions in the debt markets, the business sector has continued to exhibit economic improvement, led by Germany, France and the Netherlands”.
The signs of stronger global manufacturing activity spilled over from equity into commodities markets. Cold weather in the US and the worst flooding in two decades in Australia also pushed up the prices of energy commodities.
Crude oil and thermal coal prices touched 27-month highs on the first session of the new year, adding to inflationary concerns in developing countries’ economies.
“$100-a-barrel oil looms,” said Lawrence Eagles, head of oil research at JPMorgan in New York in a note to clients. “Oil sentiment has turned decidedly bullish.”
In London, ICE February Brent surged to an intraday peak of $96.47 a barrel in thin trade because of the public holiday in the UK. It later traded up 87 cents at $95.62 a barrel. In New York, Nymex February West Texas Intermediate rose 78 cents to $92.16 a barrel.
The rise in commodities prices and equities sent US government bonds prices lower by midday in New York.
The 30-year Treasury bond began the new year with a loss of more than 1 point. The benchmark 10-year bond yield, which moves inversely to its price, rose to 3.33 per cent, up from 3.295 per cent last week. The 10-year bond yield could rise this year to the key level of 4 per cent as a deal to extend Bush-era tax cuts leads to stronger growth, traders said.
In currency markets, the US dollar was trading almost flat against the euro and the yen. The dollar changed hands at $1.3374 against the euro, up 0.2 per cent on the day.
Economic data on Monday fuelled that optimism, with surveys pointing to robust growth in the manufacturing sector in the US, Europe and Asia.
The US Institute of Supply Management’s national factory activity index, a key gauge of economic growth, rose for the 17th successive month in December, according to data released on Monday. The index rose to 57 points last month, up from 56.6 in November.
“The takeaway here is that economic growth in the US economy looks sustained and there is no double-dip in the outlook,” said John E. Silvia, chief economist at US bank Wells Fargo. “In fact, economic growth is likely to be faster than the consensus view of 2.6 percent year-over-year growth in 2011.”
The news boosted US equity markets. In midday trading in New York, the S&P 500 was up 1.4 per cent, building on the best December for the index in nearly two decades.
The Dow Jones Industrial Average increased 1.1 per cent.
Financials led the indices higher, reversing the trend of last year, when the sector underperformed the wider US equity market.
In Asia, the renewed strength of the factory sectors in South Korea and Taiwan, combined with continued expansion in India and China and other signs of accelerating economic activity, could add to concern that inflation may be about to take off across the region.
However, manufacturing activity slowed somewhat in China and India, cheering equity investors worried about central banks there tightening monetary policy further. In Hong Kong, the Hang Seng index gained 1.7 per cent.
In Europe, equity markets rose on the back of strong manufacturing data, with France’s CAC 40 and Germany’s Dax indices posting strong gains. The FTSE Eurofirst 300 index of top European shares rose 1 per cent, with strong gains by construction, car manufacturers and industrial companies. The European index had risen 7.3 per cent in 2010.
Julian Callow, European economist at Barclays Capital, said the eurozone’s purchasing managers index provided “further evidence that, contrary to the tensions in the debt markets, the business sector has continued to exhibit economic improvement, led by Germany, France and the Netherlands”.
The signs of stronger global manufacturing activity spilled over from equity into commodities markets. Cold weather in the US and the worst flooding in two decades in Australia also pushed up the prices of energy commodities.
Crude oil and thermal coal prices touched 27-month highs on the first session of the new year, adding to inflationary concerns in developing countries’ economies.
“$100-a-barrel oil looms,” said Lawrence Eagles, head of oil research at JPMorgan in New York in a note to clients. “Oil sentiment has turned decidedly bullish.”
In London, ICE February Brent surged to an intraday peak of $96.47 a barrel in thin trade because of the public holiday in the UK. It later traded up 87 cents at $95.62 a barrel. In New York, Nymex February West Texas Intermediate rose 78 cents to $92.16 a barrel.
The rise in commodities prices and equities sent US government bonds prices lower by midday in New York.
The 30-year Treasury bond began the new year with a loss of more than 1 point. The benchmark 10-year bond yield, which moves inversely to its price, rose to 3.33 per cent, up from 3.295 per cent last week. The 10-year bond yield could rise this year to the key level of 4 per cent as a deal to extend Bush-era tax cuts leads to stronger growth, traders said.
In currency markets, the US dollar was trading almost flat against the euro and the yen. The dollar changed hands at $1.3374 against the euro, up 0.2 per cent on the day.
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