Global Market Overview

Last updated: January 29, 2013 9:52 pm

Stocks edge towards fresh highs

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Tuesday 21:40 GMT. Global stocks rose and challenged new cyclical highs, supported by better than expected corporate earnings and improving economic data.

Sentiment was also bolstered by continuing central bank largesse – the US Federal Reserve on Tuesday began a two-day monetary policy meeting – and the fading of eurozone tensions, a severe market bugbear of recent years.

The FTSE All-World equity index rose 0.6 per cent to 234.76 as the FTSE Eurofirst 300 rose 0.4 per cent and after the Asia-Pacific region added 0.9 per cent.

In New York, the S&P 500 climbed 7 points to 1,507 and closing at a five-year peak. Solid house price data from S&P/Case-Shiller was partly counteracted by news that US consumer confidence is now at its lowest in more than a year.

Still, Wall Street’s mood was buoyed by the latest in a batch of mostly sentiment-supportive corporate results.

Indeed, with about a third of the S&P 500 constituents having reported this earnings season, 75 per cent of them have delivered profits above analysts’ expectations, according to Bloomberg.

Other growth-focused products were firm, with copper up 0.2 per cent to $3.66 a pound and Brent crude closing above the $114 a barrel mark.

The dollar index fell 0.2 per cent as the euro rose 0.3 per cent to $1.3491 and gold advanced by $9 to $1,663 an ounce.

Trading in top tier government bonds was mixed. The US 10-year Treasury price erased earlier gains and fell, pushing yields 3 basis pints higher to 1.99 per cent. At the start of the week the benchmark yield briefly breached 2 per cent, the highest cost of borrowing for the US government since April.

A sale of $35bn in five-year Treasury notes was well received, drawing a bid-to-cover ratio - a measure of demand -- of 2.88, compared to 2.72 in the previous auction.

So-called “core” bond yields – including German Bunds and UK gilts – have been rising in recent weeks, not just on a perceived rotation from fixed income into equities, but on the traditional rationale that global economic growth prospects are improving.

A crucial piece of that growth picture will be provided on Friday, when the US releases official jobs data. Before that, on Wednesday, traders will get a first look at US fourth-quarter GDP numbers and private sector job creation.

More wary investors will note that economic activity worldwide is patchy, however. Sterling traded at $1.5754, up on the day but only about 75 pips above a five-month low versus the dollar, following last week’s news that fourth-quarter UK GDP shrank 0.3 per cent.

And the Reserve Bank of India used acquiescent inflation to deliver an expected interest rate cut on Tuesday in order to support growth.

India’s Sensex index slipped 0.6 per cent, bucking a mostly positive Asia-Pacific session. Australia’s S&P/ASX 200 index advanced 1.1 per cent as the nation’s business confidence index notched its biggest improvement since October 2001. Japan’s Nikkei 225 Stock Average added 0.4 per cent, while South Korea’s Kospi Composite index added 0.8 per cent after four consecutive days of losses.

Additional reporting by Jamie Chisholm in London

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