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Global stocks steadied around multi-year peaks and the U.S. dollar rose on Thursday, held aloft by robust U.S., Japanese and European data and some upbeat corporate earnings.
European car sales posted their highest year-on-year gain in four years in December, while in Japan core machinery orders jumped in November in a sign companies may be ready to ramp up investment and increase wages.
In the world’s biggest economy, meanwhile, there were upbeat early signs of this month’s performance, with the Empire State gauge of manufacturing in New York state hitting a 20 month high as new orders soared.
Also supporting sentiment, the Federal Reserve said in its Beige Book published late on Wednesday the U.S. economy continued to grow at a moderate pace from late November to the end of 2013, with some regions of the country expecting a pick-up in growth.
Buoyed by this, the U.S. dollar regained some of its swagger after being battered by the surprisingly weak U.S. non-farm payroll report at the end of last week.
It gained 0.2 per cent to 104.72 yen, adding to a 0.3 per cent rise overnight and bouncing back from a four-week low of 102.85 set on Monday.
Economic optimism weighed on safe haven gold prices – which edged lower for a third day in a row – but benefited equities. The broad MSCI all-country world index was broadly steady at 407.00 points, just 1.55 points below a 6-year high.
“For the first time in a while, the global economic recovery is driven by developed countries, and central banks remain very accommodative. All in all, the environment is favourable to risky assets,” said Pascal Voisin, chief executive officer of Natixis Asset Management, which has €292-billion under management.
Overnight, the Standard & Poor’s 500 climbed to an all-time closing high on the back of the economic data and strong quarterly earnings from Bank of America.
The second-largest U.S. bank said quarterly profit surged nearly $3-billion as revenue increased and mortgage losses plunged in the clearest sign yet the bank was shaking off the impact of the financial crisis.
“The news from Bank of America’s fourth-quarter numbers suggest the U.S. earnings season is in for a solid beat,” Evan Lucas, market strategist at financial spreadbetter IG in Melbourne, wrote in a note.
Only around 5 per cent of S&P 500 companies have already reported fourth quarter earnings, but on average they are beating consensus by 1.4 per cent, according to Thomson Reuters StarMine.
Banks have generally done well so far, with JPMorgan Chase & Co. and Wells Fargo & Co. both reporting better-than-expected results this week.
Citigroup and Goldman Sachs are to report later in the day, followed by Morgan Stanley on Friday.
In Europe, though the situation was a bit more mixed. On the up side, heavyweight miner Rio Tinto added 1.4 per cent thanks to a solid production update.
Other sectors, though, showed weakness, with Dutch grocer Ahold and Swiss watch and jewellery marker Richemont both missing quarterly sales expectations. Their shares fell 3.2 and 2.0 per cent respectively, keeping the pan-European FTSEurofirst 300 index below recent 5-1/2 year highs.
Overall, though, sentiment on the region remained relatively upbeat. Spanish yields dipped on Thursday before a debt auction which was expected to see strong demand from investors looking to reinvest large recent debt repayments.
Madrid is setting a brisk pace for its 2014 funding programme and offers up to €5.5-billion of 2017, 2026 and 2028 bonds, a week after raising an above-target €5.3-billion at an auction of five– and 15-year bonds.
U.S. crude futures eased to $93.92, retreating from a two-week high set in the previous day and hit by expectations of more supply from the Middle East and North Africa.