Dollar rebounds after strong US data

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Global equity markets rose and the dollar recovered from early losses yesterday after US economic data ranging from manufacturing to housing to consumer confidence delivered a dose of optimism to investors who have been preoccupied with worries over Federal Reserve policy.
European shares bounced off seven-month lows while MSCI’s all-country world equity index rose from prices last seen at the beginning of the year. The world index rose 0.8 percent.
The FTSEurofirst 300 of leading European shares rose 1.5 percent to close at 1,130.37, a day after closing at its lowest level since late November.
The Dow Jones Industrial Average was up 115.53 points, or 0.79 percent, at 14,775.09. The Standard & Poor’s 500 Index was up 15.34 points, or 0.98 percent, at 1,588.43. The Nasdaq Composite Index was up 25.37 points, or 0.76 percent, at 3,346.12.
The pause in the market’s recent rout began when two Fed policymakers on Monday downplayed the notion of an imminent end to the central bank’s money-printing and said the market reaction was not yet a cause for concern.
Asian markets then capped a day of wild swings, during which Chinese stocks plunged to their lowest level since the global financial crisis began, followed by a late rally on hopes authorities in China would step in to prevent a crisis.
China’s central bank fueled the talk at a news briefing where it sought to allay fears of a credit squeeze by committing to guide interest rates to “reasonable” levels after they had been allowed to spike over the past week.
The dollar extended gains against the yen and euro on Tuesday after data showed sales of new US single-family homes rose to their highest in nearly five years in May, confirming the housing market’s strengthening tone.
The dollar rose against the yen, to 97.76 yen from about 97.61 yen before the data, up 0.04 percent on the day.
The euro fell to the session low of $ 1.3066 where it traded before the data. It was trading at 1.3083, down 0.26 percent.
“The dollar has been trading on Fed speculation for the last two weeks,” currency strategist John Doyle at Tempus Inc. in Washington said.

Prices of US Treasuries edged down slightly in choppy trade, while German Bund futures pared early gains on the US manufacturing data.
The benchmark 10-year US Treasury note was down 9/32 in price to yield 2.5763 percent.
Bund futures settled at 140.54, up 23 ticks from Monday’s close. Bunds rose as high as 141.01 before the data.
Oil was above $ 101 a barrel, rebounding from a three-week low, as investor concern eased about a liquidity crunch in China and as Canadian pipeline closures threatened exports to the United States.
Brent crude rose 36 cents to $ 101.52 a barrel. US oil rose 24 cents to $ 95.42.

 

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