You can also read Inside the Market’s comprehensive Before the Bell report, written by Darcy Keith, available exclusively to Globe Unlimited Subscribers. It features continuously updated market news and trading action before North American markets open, including stocks to watch, analyst actions and best morning reads on the web. Click here to see the latest posts at Inside the Market and here to subscribe to Globe Unlimited.
Shares were mostly higher on Wednesday as the World Bank upgraded its outlook for the global economy, while the U.S. dollar extended gains in the wake of surprisingly strong U.S. consumer spending figures.
European stocks started with a spring in their step too, as confirmation that Germany saw robust growth last year prompted the biggest rise of the year so far for Frankfurt’s DAX.
The German benchmark’s near 1 per cent gain was complemented by smaller but still significant gains on bourses elsewhere in the region, taking the FTSEurofirst 300 index to a fresh 5-1/2 year high.
“German consumption turned out to be especially robust last year,” said Dekabank economist Andreas Scheuerle. “With the shackles of the sovereign debt crisis being loosened, this year should lead to considerably stronger growth.”
Helping the better mood overall, the World Bank upgraded its forecast for global growth this year by two tenths of a point to 3.2 per cent, and predicted a faster pace for both 2015 and 2016.
While the bank trimmed forecasts for some developing nations, including China, growth in emerging markets as a whole was seen accelerating to 5.3 per cent this year.
Data from China on Wednesday showed new bank lending and money supply growth missed forecasts for December, suggesting the central bank’s efforts to put the brakes on credit expansion to contain debt levels is gaining traction.
Shares in Shanghai dipped 0.4 per cent, but there was little obvious impact elsewhere in the region.
“The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead,” said World Bank chief Jim Yong Kim.
U.S. CONSUMPTION ON THE UP
The U.S. dollar was also back in vogue. It extended its rally to 104.35 yen, leaving behind Tuesday’s trough of 103.00. It also firmed against the euro, which was last worth $1.3611 and was also weaker against the yen at 142.03 yen.
The U.S. currency had sprung ahead on Tuesday after retail data soothed worries raised by last week’s disappointing payrolls report. While the headline measure of retail sales rose only a modest 0.2 per cent, a core measure favoured by analysts beat all expectations with a jump of 0.7 per cent.
“Growth in final sales, particularly household consumption, appears to have picked up sharply in Q4,” said Barclays economist Peter Newland. The bank lifted its forecasts for economic growth in the quarter to an annualised 3.5 per cent.
That, combined with a burst of merger activity and earnings beats by Wells Fargo and JPMorgan, helped lift the Dow per cent. The S&P 500 added 1.08 per cent and the tech-laden Nasdaq jumped 1.69 per cent.
Futures prices pointed to some additional ground being made when Wall Street reopens, though with another flurry of earnings due, plus the NY Empire manufacturing survey and December PPI data on tap, moves were set to be cautious.
The better economic news left 10-year U.S. Treasury yields up 5 basis points at 2.87 per cent, while Germany’s growth also pushed up Bund yields.
Price moves have been choppy recently as the market tries to second-guess the speed of tapering by the Federal Reserve, and when it might actually start raising interest rates.
Two of the most hawkish Fed officials, Dallas Fed chief Richard Fisher and Charles Plosser at the Philadelphia Fed, on Tuesday advocated pushing on with tapering.
The more dovish head of the Chicago Fed, Charles Evans, will take his turn to speak later on Wednesday.
A pullback in the yen was welcomed by the Japanese market, with the Nikkei bouncing 2.2 per cent after suffering its sharpest daily drop in five months on Tuesday.
Progress elsewhere in Asia was patchy, with investors suffering whiplash after several days of wild swings. Singapore added 0.6 per cent as did Taiwan, but MSCI’s broadest index of Asia-Pacific shares outside Japan eked out just 0.1 per cent.
In commodity markets, a firmer dollar and rising equities shoved gold back to $1,237 an ounce, off a high of 1,255.00 hit Tuesday.
Oil prices were softer after a mixed performance overnight. U.S. crude dipped 8 cents to $92.51 a barrel, while Brent eased 17 cents to $106.22.