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Tuesday, 21 September 2021

World stocks rise on Fed stimulus hopes

Continuing bad economic news and dim forecasts expected to spark the US Federal Reserve in to action

AP, Wednesday 31 Aug 2011
US stocks
World stocks climb following federal reserves stimulus
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World stock markets rose Wednesday as investors hoped that the Federal Reserve would respond to mounting signs of weakness in the global economy by providing more stimulus to the U.S. economy.

Economic reports have been largely negative in recent weeks, with consumer and business confidence slumping sharply in developed economies.

Although Fed Chairman Ben Bernanke last week did not signal any new help from the central bank - but rather asked the government to help growth - he left the door open to more stimulus if needed.

"Economic news continues to head dowanhill yet markets are taking evidence of slowing growth as a likely trigger for more Fed stimulus," said Mitul Kotecha, analyst at Credit Agricole CIB.

European shares rose in early trading. Britain's FTSE 100 was 0.9 per cent higher at 5,313.96 and Germany's DAX gained 1.3 per cent to 5,716.11. In Paris, the CAC-40 rose 1.6 per cent to 3,208.76.

After Asia broadly closed higher, Wall Street was also set to make gains on the open. Dow Jones industrial futures were 0.8 per cent higher at 11,587 and S&P 500 futures rose 0.8 per cent to 1,214.50.

Despite the gains, analysts say market sentiment remains fragile and the stock market will struggle to keep rising in the face of more weak economic indicators.

The latest European data published Wednesday was in fact downbeat - inflation remained steady at 2.5 per cent, above the official target, while unemployment was stuck at 10 per cent, showing almost no improvement from 10.2 per cent a year earlier.

The weakness in Europe is particularly worrying for investors because it is largely due to a slowdown in Germany, the region's largest economy, which had been driving growth during the past 18 months of debt crisis turmoil.

One of the main concerns is that as the labor market fails to heal, consumer spending will remain poor, weighing on growth in coming quarters.

That trend was evident in the earnings of Carrefour, the French retailing giant which on Wednesday posted an unexpected net loss in the first half and abandoned its growth target for the year. Its share price slumped 3.5 per cent.

In Asia, Japan's benchmark Nikkei 225 logged a fifth day of gains to close narrowly up at 8,955.20 after spending part of the day in negative territory.

Hong Kong's Hang Seng jumped 1.6 per cent to 20,534.85 and South Korea's Kospi gained 2 per cent at 1,880.11. Australia's S&P/ASX 200 rose 0.6 per cent at 4,296.50. Benchmarks in the Philippines, Taiwan and Singapore also rose.

Sentiment in Japan was dampened after growth in industrial production fell far short of forecasts in July. The Ministry of Economy, Trade and Industry said industrial production edged up 0.6 per cent from the previous month - falling short of its projected 2.2 per cent rise.

Mainland Chinese shares were mixed, with the benchmark Shanghai Composite Index gaining marginally to 2,567.34 after dipping almost 1 per cent earlier in the day. The Shenzhen Composite Index lost 0.4 per cent to 1,143.34.

In currencies, the euro dropped to $1.4440 from $1.4447 late Tuesday in New York. The dollar fell to 76.57 yen from 76.72 yen.

Benchmark oil for October delivery fell $1.10 to $87.80 in electronic trading on the New York Mercantile Exchange. Crude rose $1.63 to settle at $88.90 on Tuesday.

In London, Brent crude for October delivery dropped 24 cents to $113.78 on the ICE Futures exchange.

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