US Economic News Shores Up Markets
A run of positive U.S. economic and corporate news shored up markets Tuesday a day after investors were spooked by big falls in commodity prices - notably gold - as well as growing concern over the U.S. and China, the world’s two-largest economies.
Monday’s explosions in Boston, which killed three people, had also provided investors with a stark reminder of the threats posed by terrorists to a fragile global economic recovery.
However, some of the concerns that dominated trading on Monday were eased by news that U.S. housing starts rose in March to a little over 1 million to a near five-year high. Subdued inflation for the month together with another solid increase in industrial production also helped shore up the market mood.
"Strong industrial production and housing starts data for March suggest that the U.S. economy saw a robust end to the first quarter, but nagging doubts persist about the sustainability of such impressive growth in the spring," said Chris Williamson, chief economist at Markit.
And with Coca-Cola, Goldman Sachs and Johnson & Johnson reporting better-than-expected first-quarter profits, the scene was set for U.S. stock indexes to recoup a chunk of their previous day’s losses - the Dow Jones industrial average was up 0.7 percent at 14,708 while the broader S&P 500 index rose 0.8 percent to 1,565.
In Europe, most markets saw early losses erased following the perky opening on Wall Street. Germany’s DAX was up 0.2 percent at 7,728 while the CAC-40 in France rose 0.1 percent to 3,714. The FTSE 100 index of leading British shares remained in negative territory, however, trading 0.2 percent lower at 6,331.
A key point of interest in financial markets over the past few days has been the gold price, which has fallen dramatically amid a welter of concerns, including fears that European governments may sell the precious metal as part of their debt-fighting measures.
By mid-afternoon London time, it was trading 2.3 percent higher at $1,393 an ounce. Still, that’s only a minor bounce back from Monday, when gold logged its biggest one-day decline in more than 30 years, tumbling $140.30, or 9 percent, to $1,361, just above its earlier low of $1,357.10.
"At some point gold could well be subjected to participants looking to own gold at cheaper levels than over the last few months," said David White, a trader at Spreadex. "But, critically, calling the bottom on any such process is hazardous at best."
The gold price isn’t the only commodity that’s taken a battering over recent days. Industrial metals have also faltered amid concerns over the global economic recovery, as has the price of oil. The benchmark New York crude rate was down again Tuesday, trading 19 cents lower at $88.52 a barrel.
Currency markets also remained volatile. The dollar was 1.2 percent higher against the Japanese yen on Tuesday, at 98.12 yen. The euro, which often rises when investor appetite for risk is elevated, was up 0.5 percent against the dollar, at $1.3104.
The yen’s decline comes a day after it rallied strongly in the previous session amid the global growth concerns - the Japanese currency is often considered a safe haven asset at times of market jitters.
Over the previous week or so, the yen had taken a battering, to the potential benefit of Japan’s exporting powerhouses, due to the Bank of Japan’s aggressive new monetary policy to get the country’s moribund economy going again.
Earlier in Asia, stocks were mixed after being hit Monday by lower than anticipated Chinese economic growth figures. While Japan’s Nikkei fell 0.4 percent to close at 13,221.44 and Hong Kong’s Hang Seng lost 0.5 percent to 21,672.03, benchmarks in South Korea and mainland China rose.