While you were sleeping: Optimism underpins stocks

While you were sleeping: Optimism underpins stocks

(BusinessDesk) February 18 - Stocks on Wall Street rose as investors’ optimism about the outlook for growth in the economy and corporate profits wasn’t tempered by data showing inflation and weekly jobless claims rose more than expected.

In early afternoon trading, the Dow Jones Industrial Average edged 0.08% higher, the S&P 500 Index gained 0.18% and the Nasdaq Composite Index advanced 0.21%.

U.S. core consumer prices accelerated at their fastest pace in more than a year in January, while initial claims for unemployment insurance increased in the latest week.

Even so, the Philadelphia Federal Reserve said its Mid-Atlantic business activity index rose sharply in February, confirming recent signs of a strengthening economy.

Investors kept a close eye on the latest developments in the Middle East, keeping a lid on gains.

Bahrain police stormed a square in Manama, killing at least three people. Clashes were reported in Libya, sandwiched between Egypt and Tunisia, while at least 40 were wounded in Yemen in the seventh day of demonstrations against the president's 32-year rule.

"How the market shrugged off the Egypt unrest and the continued sporadic unrest throughout the Middle East ... confirm[s] that buyers are using any pause in the market as an opportunity to get in," Henry Smith, chief investment officer at Haverford Trust Co in Philadelphia, told Reuters.

The tension helped bolster the appeal of U.S. Treasuries. The yield on ten-year notes declined four basis points to 3.58% at 11.49am in New York, according to BGCantor Market data, the lowest level since February 4.

The Fed bought US$7.2 billion in notes maturing from May 2018 to August 2020 as part of its plan to inject US$600 billion into the world's largest economy.

In Europe, the Stoxx 600 rose 0.2% to 291.16, bringing its gains this year to 5.6%.

The advance has lifted its valuation to more than 15 times the reported profits of its companies, near the highest in nine months, according to data compiled by Bloomberg.

Cap Gemini SA jumped more than 7% after the computer-services company said full-year profit climbed 57%.

Oil was steady near the highest levels in 2 1/2 years as investors weighed the possibility of a disruption of oil flows by the tensions in the Middle East.

"All in all, the pace of change sweeping the region is truly mind-boggling, and we find it unlikely oil prices will settle any time soon as long as this kind of upheaval continues to spread," Edward Meir, senior commodity analyst at brokers MF Global, told Reuters.

Brent crude for April delivery fell 8 cents to US$103.70 by 1508 GMT versus US$103.78 on Wednesday, its highest close since September 2008. U.S. crude for March delivery rose 13 cents to US$85.12 a barrel.

A Reuters poll of analysts and banks suggested on Thursday that Brent would drop later this year as the risk premium from unrest in the Middle East ebbs.

"The current price is unsustainable," Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt, told Reuters. "Tension in the Middle East should calm down at some point, whereas [North Sea] output should normalize."

Gold rose, bolstered by concern about the Middle East and signs of rising inflation.

Spot gold was bid at US$1,383.20 an ounce at 1633 GMT, against US$1,374.20 late in New York on Wednesday. Earlier in the session, it rose to a five-week high of US$1,384.30 an ounce.

Meanwhile, the International Monetary Fund is set to warn G20 finance ministers this weekend of growing risks to the world economy from surging food prices and public finances while also advocating a somewhat weaker U.S. dollar.

The Fund's report, entitled Global Economic Prospects and Policy Challenges and obtained by Reuters, to a two-day meeting starting on Friday, pointed to rising bond yields as a key risk to the U.S. fiscal outlook and global growth, and said the euro zone needed to take more comprehensive steps to deal with an ongoing debt crisis.

"The global economic recovery is advancing. However the recovery remains uneven, with downside risks in advanced economies remaining elevated while overheating risks are growing in emerging economies," it said.

The greenback weakened 0.35% against a basket of major currencies.

(BusinessDesk)

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