World’s largest economies greet New Year with op­ti­mism

The Star Early Edition - - BUSINESS REPORT - Bloomberg and Reuters

US AND Euro­pean stocks rose with com­modi­ties as data bol­stered op­ti­mism in the world’s largest economies.

Crude touched an 18-month high and the dol­lar ral­lied.

The Dow Jones in­dus­trial av­er­age re­sumed its ad­vance to­wards 20 000 points as a read­ing on US man­u­fac­tur­ing rose at the fastest pace in two years.

The In­sti­tute for Sup­ply Man­age­ment said yes­ter­day that its in­dex in­creased to 54.7 points, the fourth con­sec­u­tive ad­vance, from 53.2 points a month ear­lier. A re­bound in ex­port mar­kets has helped give an added boost to US fac­to­ries, fol­low­ing de­cel­er­a­tion over the past of cou­ple years.

Banks were the main driv­ers of the gains on Wall Street yes­ter­day, with the S&P 500 fi­nan­cial sec­tor ris­ing 1.33 per­cent. Bar­clays raised price tar­gets on sev­eral Wall Street banks, in­clud­ing Bank of Amer­ica, Wells Fargo and JPMor­gan.

Goldman Sachs rose 1.5 per­cent to $243.50 (R3 335.83) and was the top stock on the Dow.

Euro­pean eq­ui­ties headed for a bull mar­ket as the pace of Ger­man in­fla­tion dou­bled last month.

Long-term in­fla­tion ex­pec­ta­tions in the 19 coun­try euro zone, mea­sured by the five-year, five-year for­ward rate, are now at their high­est in more than a year and close to the ECB’s near 2 per­cent tar­get, as it pre­pares to pare back the pace of its mass money-print­ing scheme.

Bri­tain’s FTSE 100 wasted no time on its first day of trade in 2017 as it hit a record high of 7 200 points.

Cop­per led met­als higher after Chi­nese man­u­fac­tur­ing closed the year on a rel­a­tively ro­bust note.

The man­u­fac­tur­ing pur­chas­ing man­agers in­dex (PMI) sta­bilised near a post-2012 high in De­cem­ber, edg­ing down to 51.4 points from 51.7 points the prior month. The non-man­u­fac­tur­ing PMI slipped to 54.5 points from a two-year high of 54.7 points in Novem­ber. Num­bers higher than 50 points in­di­cate im­prov­ing con­di­tions.

A gauge of fac­tory in­put prices surged to a five-year high of 69.6 points.

Crude soared to the high­est since July 2015 as Kuwait cut out­put. Oil prices hit an 18-month high as a deal to cut out­put took ef­fect on Sunday, and on up­beat China fac­tory data.

The dol­lar racked up its best gain – 1.2 per­cent – since De­cem­ber 15 against other top world cur­ren­cies to leave it just shy of a 14-year high.

“If you look at the state of the econ­omy glob­ally, things are in pretty good shape,” ABN Amro’s chief in­vest­ment of­fi­cer Di­dier Duret said. “It’s not only a Trump rally, it is a cycli­cal rally,” he added. “We still be­lieve the dol­lar will con­tinue its rise and the euro will weaken, which can pro­vide sub­stan­tial im­pe­tus for Euro­pean earn­ings.”

The strong start to 2017 is a re­ver­sal from a year ago, when con­cern over China’s econ­omy roiled global fi­nan­cial mar­kets. China’s econ­omy has been a source of strength in re­cent weeks, im­prov­ing in­vestor risk ap­petite fol­low­ing a pe­riod of cau­tion at year-end.

Ad­vances in the dol­lar and US stocks sparked by Don­ald Trump’s elec­tion re­sumed after fad­ing late last year.

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