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Stocks advance as optimism continues into year-end

Stocks advance as optimism continues into year-end

Hopes that the world economy will enjoy stronger growth in 2011 continued to buoy stocks Wednesday though lackluster trading volumes in the traditionally quiet period between Christmas and the New Year kept the momentum in check.
Stocks have been buoyant in the last few months as expectations of another slide into recession around the world have dissipated. Most of the world's major indexes are poised to post solid gains for 2010, and many are actually trading at their highest levels since Lehman Brothers collapsed in September 2008, which proved to be the catalyst to a banking crisis and the ensuing global recession.
"Equity markets are apparently in optimistic mood as they approach the New Year," said Stephen Lewis, an analyst at Monument Securities.
In Europe, Germany's DAX closed up 23.37 points, or 0.3 percent, at 6,995.47, while the CAC-40 in France rose 31.93 points, or 0.8 percent, to 3,890.65. The FTSE 100 index of leading British shares bucked the trend though, falling 12.56 points, or 0.2 percent, to 5,996.36.
While the DAX and the CAC have been open for business the last couple of days, traders in the U.K. have been on holiday. On Christmas Eve, its previous trading day, the FTSE closed above 6,000 for the first time since the summer of 2008 and traders booked profits on their return.
In the U.S., the Dow Jones industrial average was up 25.20 points, or 0.2 percent, at 11,600.74 around midday New York time, while the broader Standard & Poor's 500 index rose 2.39 points, or 0.2 percent, to 1,260.90.
With no major economic data scheduled during the U.S. session, investors will be keeping a close eye on a government bond auction in light of a weak offering the previous day. On Tuesday, the U.S. Treasury sold $35 billion in five-year notes, but demand was weaker than expected as fewer investors, including foreign buyers, turned out.
The Treasury is planning to auction $29 billion in seven-year notes later.
Investors are also keeping a close watch on China following last week's surprise decision by the monetary authorities to raise a key interest rate for the second time since October as they try to keep a lid on rising inflation.
Stocks in China recovered some ground Wednesday following two days of losses in the wake of the rate hike.
The Shanghai Composite Index rose 0.7 percent to close at 2,751.53, and Hong Kong's Hang Seng index climbed 1.5 percent to finish at 22,969.30.
Elsewhere, Japan's benchmark Nikkei 225 stock average rose 51.91 points, or 0.5 percent, to close at 10,344.54, while South Korea's Kospi was 10.17 points, or 0.5 percent, higher, ending at 2,043.49.
Oil prices are also in focus as a number of analysts predict that a barrel of crude will soon spike above $100 a barrel.
There was a modest retreat Wednesday with benchmark crude for February delivery down 18 cents to $91.31 a barrel on the New York Mercantile Exchange.
Many analysts think that a big feature of 2011 will be what happens to oil prices and what the impact on inflation levels will be. If prices start to rise faster than anticipated, then central banks around the world may start considering raising interest rates from their current super-low levels sooner than they thought.
Inflation figures out of Germany certainly provided evidence that higher energy costs are beginning to feed through into the wider economy. The Federal Statistical Office said consumer prices rose 1.7 percent in the year to December, up from November's rate of 1.5 percent, largely on the back of higher oil and fuel prices.
The figures helped support the euro, which by late-afternoon London time was trading 0.3 percent higher at $1.3157.
Generally activity in the currency markets was fairly subdued, though traders continued to keep a close watch on the dollar's value against the yen. The Japanese currency has risen on nine of the last 10 days against the dollar, to the chagrin of the country's exporters. A higher yen makes it more difficult for them to compete in international markets.
Neil Mellor, senior currency strategist at Bank of New York Mellon, said drawing inferences from what is going on at this time of year is best avoided but added that the recent price action could be a taste of things to come.
"Should the yen's value against the dollar continue on its recent tack, then the first 10 days of the New Year could well oblige the Japanese ministry of finance to instigate the first talking point of 2011," said Mellor.
In September, the Bank of Japan bought dollars and sold yen for the first time in six years in the hope of putting a ceiling, at the very least, on the yen appreciation.
By late-afternoon London time, the dollar was 0.6 percent lower at 81.92 yen.
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AP Business Writer Kelvin Chan in Hong Kong contributed to this report.


Updated : 2020-12-02 12:46 GMT+08:00