Confidence in Recovery Boosts Stocks
Rising confidence that the global economy is set on the path to recovery sent European stocks sharply higher Monday, building on gains in Asia.
Wall Street, which was shuttered Monday for the Labor Day holiday, will resume trading today, with many major U.S. market indexes at or near their highest levels in more than a year as of Friday.
The Dow industrials ended Friday at 9,415.82; the Nasdaq composite was at 1,810.45.
A slew of positive economic indicators recently has encouraged investors worldwide to switch out of bonds and buy stocks, pushing equity indexes to multi-month highs.
The latest figures to buoy European stocks showed euro-zone manufacturing inched closer to growth in August.
The Reuters Eurozone Purchasing Managers’ index for August rose to 49.1 from 48, just ahead of analysts’ expectations but just shy of topping the 50 mark which would indicate expansion.
Britain’s FTSE-100 stock index rose 1% to 4,204.40 on Monday, while Germany’s DAX index jumped 2.5% to 3,571.22 and Spain’s IBEX index gained 1.2% to 7,194.40.
The positive tone for European stocks was set by overnight gains in Tokyo.
Japan’s Nikkei 225 index surged 3.2%, to 10,670.18, its highest point since July 2002, boosted by strong domestic manufacturing data.
South Korea’s KOSPI index rose 0.6% to 764.11, while Singapore’s Straits Times index gained 0.4% to 1,605.60.
Japan’s industrial activity expanded in August at the fastest clip in more than a year, according to data reported Monday.
Markets will be looking for further confirmation of the global economic rebound in today’s Institute of Supply Management survey of U.S. manufacturing in August.
The more bullish mood among equity investors and a big sell-off in Japanese debt helped push up bond yields and send fixed income prices falling. Yields on 10-year Japanese government bonds hit their highest since February 2001 on Monday, rising to 1.59% from 1.46% Friday.
Expectations that the global recovery will float Japan’s moribund economy helped the yen higher against the dollar at about 116.55 although it gave up some early gains. Traders were watching for comments by U.S. Treasury Secretary John W. Snow on intervention in the currency market by Japan’s authorities.
The euro was weaker against the dollar at $1.096 after setting one-week highs at $1.102 earlier in the day.
