Dow Near Record Amid Global Market Recovery
Markets are ending the month in upbeat fashion Thursday, with the Dow Jones industrial average within striking distance of its all-time record high despite the prospect of spending cuts by the U.S. government.
Rising hopes over the global economic recovery following a run of upbeat economic data, particularly out of the U.S., and indications from the Federal Reserve chairman Ben Bernanke that the central bank isn’t going to change its super-easy monetary policy any time soon have combined to shore up markets following the Italian election rout.
Many stock indexes are back where they were at the start of the week before the messy Italian election results, which reignited concerns over the country’s appetite for further austerity and Europe’s debt crisis as a whole.
"Although February isn’t going to stand out in traders’ minds the same way that January did, it’s certainly shaping up to be a robust end to the month," said Fawad Razaqzada, market strategist at GFT Markets. "Bernanke’s two-day testimony has been well-timed and the continued commitment to stimulus measures - specifically to support housing, autos and other parts of the economy - has given the bulls a new lease of life."
In Europe, the FTSE 100 index of leading British shares was up 0.5 percent at 6,355 while Germany’s DAX rose 0.8 percent to 7,736. The CAC-40 in France was 0.5 percent higher at 3,711.
Italian shares slowly moved higher through the day despite ongoing concerns about the ability of political leaders to cobble together a government that will enact further economic reforms and tight budgetary controls. The FTSE MIB index in Milan was up 0.2 percent at 15,854.
However, most focus in the markets was on Wall Street, where the Dow Jones industrial average appears to have a realistic chance of closing at a record later. The index was flat at 14,072. The Dow hit its record high, 14,164.53, in October 2007.
The broader S&P 500 index is still a way from its record but it did close Wednesday at a five-year high. It was up a further 0.2 percent at 1,519.
The opening on Wall Street got a modest boost from the news that the U.S. economy, the world’s largest, grew at an annualized rate of 0.1 percent in the final three months of 2012. The previous estimate from the Commerce Department had it contracting the equivalent rate.
Unlike the end of 2012, when investors were concerned about the upcoming fiscal cliff, investors appear sanguine over the risks associated with planned spending cuts that are due to take effect at the start of March as part of a previous budget agreement between the White House and Congress. The planned "sequester" could hit U.S. growth if no deal is reached to avoid it. Previous experience, however, suggests a last-minute deal will be cobbled together.
"Given the late deals we’ve seen in the past, this could be due to high expectations of a late deal, or alternatively, it may just be that compared to the fiscal cliff at the end of last year, the impact will be minor," said Craig Erlam, market analyst at Alpari.
The dollar has not been affected by the planned cuts and has rallied hard this week amid strong U.S. economic news and rising tensions over Italy. The euro was down 0.4 percent at $1.3093 while the dollar was flat at 92.20 yen.
Earlier in Asia, Tokyo’s benchmark led gains after the government of Prime Minister Shinzo Abe nominated Haruhiko Kuroda, currently president of the Asian Development Bank, to head Japan’s central bank. The Nikkei 225 stock average closed at 11,559.36, up 2.7 percent.
Kuroda is seen as a supporter of Abe’s efforts to overcome Japan’s 20 years of economic stagnation with bolder monetary easing, a weaker yen and bigger government spending.
Elsewhere, South Korea’s Kospi ended 1.1 percent higher at 2,026.49, the highest close since Jan. 2, while Hong Kong’s Hang Seng added 2 percent to 23,020.27.
Oil markets remain fairly flat with benchmark crude for April delivery up 3 cents at $92.79 a barrel in electronic trading on the New York Mercantile Exchange.