Global stocks surge to 18-month high

Updated 12 December 2012
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Global stocks surge to 18-month high

NEW YORK: US stocks advanced and European shares rallied to an 18-month high yesterday after
German investor sentiment rose sharply in December and on expectations the Federal Reserve will keep pumping money into the US economy.
The euro gained versus the dollar, as investors steered clear of the US currency ahead of the Fed's meeting yesterday and today, while US government bond prices fell.
Morale among German analysts and investors improved sharply in December, jumping to 6.9 against expectations of -12.0, fanning hopes that Europe's largest economy will avoid recession this winter.
"We've been getting a lot of the beginning of our day from seeing what Europe has been doing and I think that's going to hold true today," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
The lack of progress in negotiations about the US "fiscal cliff" has kept investors from making aggressive bets in recent weeks, though most expect a deal will eventually be reached.
While the pace of talks in Washington to avert impending US tax hikes and spending cuts quickened, senior politicians on both sides cautioned that an agreement on all the outstanding issues remained uncertain.
The Dow Jones industrial average gained 61.56 points, or 0.47 percent, to 13,231.44. The Standard & Poor's 500 Index rose 7.13 points, or 0.50 percent, to 1,425.68. The Nasdaq Composite Index added 23.71 points, or 0.79 percent, to 3,010.67.
The FTSEurofirst 300 index rose 0.3 percent to 1,138.14 points, having hit its strongest since June 2011. The MSCI global stock index edged up 0.5 percent to 336.51 points.
The US central bank is expected to announce a new round of Treasury securities purchases at the end of its meeting today, according to a Reuters poll. The program would replace its "Operation Twist" stimulus, which expires at the end of the year.
Many economists believe the Fed will announce monthly bond purchases of $ 45 billion, although some think it could be more.
"We anticipate the Fed will announce Treasury purchases and as that depresses yields it will have a negative impact on the dollar and that supports the euro," said Jane Foley, senior currency strategist at Rabobank.
The euro rose 0.4 percent to $ 1.2989, while the dollar was little changed at 82.34 yen.
Markets had been rattled on Monday by Italian Prime Minister Mario Monti's announcement he would step down some weeks early.
But the upbeat ZEW data helped lift shares and the euro from their gloom.
Expectations of more easing drove the dollar index down 0.3 percent, and pushed the Canadian dollar to a two-month high, while the New Zealand dollar hit a nine-month high of $0.8369.
Benchmark 10-year Treasury notes were trading 9/32 lower in price to yield 1.65 percent, the highest in over a week and up from 1.63 percent late Monday. Investors were also
pushing for price concessions heading into $ 66 billion of US government debt auctions this week.
In the oil market, Brent crude rose 52 cents to $ 107.85 a barrel after OPEC said its production declined in November, while a weaker dollar and Middle East unrest also supported prices.
US crude gained 19 cents to $ 85.75.
Gold was steady near $ 1,710 an ounce, with more US stimulus expected to support gold's appeal as a hedge against inflation.


Saudi economy sees ‘stabilization’: Analyst

Updated 20 min 32 sec ago
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Saudi economy sees ‘stabilization’: Analyst

  • Saudi Arabia reduced its budget deficit by 60 percent to SR49 billion in the first nine months of the year
  • Paul Wetterwald: The most recent data suggests some kind of stabilization, but resisting the temptation to re-expand government spending in line with higher oil prices will remain a challenge

LONDON: Saudi Arabia’s reduction in its budget deficit marks a “stabilization” of its economy but avoiding big hikes in government spending will remain a challenge, according to a new research note.
Saudi Arabia reduced its budget deficit by 60 percent to SR49 billion ($13 billion) in the first nine months of the year, official figures published last month show.
The reduction — greater than anticipated in earlier budget forecasts — was the result of a significant growth in both oil and non-oil revenues, the Ministry of Finance said. 

A research note by Paul Wetterwald — chief economist for Indosuez Wealth Management, the global wealth management division of Crédit Agricole, said that this marked an “impressive” reduction in the deficit given it was accompanied by a rise in government spending.
Going forward, however, minimizing hikes in government spending will be key, Wetterwald wrote in the note circulated on Monday.
“The most recent data suggests some kind of stabilization, but resisting the temptation to re-expand government spending in line with higher oil prices will remain a challenge,” he wrote.
Wetterwald pointed out that Saudi Arabia’s debt-to-GDP ratio is set to rise over the coming years.

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