While you were sleeping: Wall St gains, greenback falls; Geithner sees growth

Wednesday 23rd September 2009

Stocks climbed on Wall Street on optimism a revival in global economic growth will stoke earnings. The Dow Jones Industrial average climbed to an 11-month high, led by JPMorgan Chase after Bank of America raised its earnings estimate for the lender.

The Dow gained 0.5% to 9829.87 and the Standard & Poor’s 500 rose 0.7% to 1071.66. The Nasdaq Composite advanced 0.4% to 2146.30.

JPMorgan rose 4.3% to US$46.47 after Bank of America raised its third-quarter earnings estimate to 49 US cents a share from 46 cents.

Bank of America’s own shares climbed 2.1% to US$17.61 after Richard Bove, an analyst at Rochdale Securities, raised his price target to US$25 from US$19.

Alcoa Inc., the aluminium producer, rose 2.3% to US$14.26, as prices of metals gained. Chevron Corp. edged up 0.8% to US$72.63 as the price of oil strengthened.

American International Group tumbled 5.4% to US$45.80 amid the prospect of federal government will agree to ease the terms of the insurer’s $182.5 billion bailout. MBIA Inc., the bond insurer, surged 22% to US$8.24, leading the S&P 500 higher.

US Treasury Secretary Timothy Geithner said the US economy is at “the very beginnings of recovery” and G-20 leaders would try to find ways to rebalance the global economy at their meeting this week in Pittsburgh.

"We need to make sure that we keep at this, so we have in place a recovery that is going to be self-sustaining, led by private demand, a financial system that can actually provide the credit that is needed," he told journalists.

The US wants the G-20 to adopt a framework that would encourage debtor nations such as America to save more and curb consumer spending, while exporters such as China would be encouraged to spend more.

US Treasuries rose after the sale of a record $43 billion in two-year notes drew the strongest demand in two years.

Bid at the auction amounted to 3.23 times the amount of debt on offer and indirect bidders, which include foreign central banks, bought 44.6% of the bonds.

The yield on 10-year Treasuries fell 3 basis points to 3.45%.

The US dollar fell versus the euro as optimism about a global recovery stoked investors’ appetite for higher yielding, or riskier assets.

The dollar weakened to US$1.4797 per euro from US$1.4680 and earlier dropped to a 12-month low US$1.4821. The greenback slipped to 91.12 yen from 91.93. Japan’s currency traded at 134.88 per euro from 134.96.

The Dollar Index, which measures the greenback against six major currencies, fell 0.9% to 76.07.

Stocks in Europe rose, with the Dow Jones Stoxx 600 rising 0.5% to 244.22 as Switzerland and Italy lifted their economic forecasts.

Italian gross domestic product will grow 0.7% in 2010, according to a government forecast and the Swiss economy will edge up 0.4%, based on an estimate from the State Secretariat for Economic Affairs.

Helping buoy sentiment, the Asian Development Bank yesterday said growth in Asia ex-Japan will be 3.9% this year and 6.4% in 2010.

Among regional benchmarks, the UK’s FTSE 100 rose 0.2% to 5142.60, Germany’s DAX 30 gained 0.7% to 5709.38 and France’s CAC 40 advanced 0.3% to 3823.52.

STMicroelectronics rose 2.4% after prices of computer chips gained to the highest level in a year.

Air France-KLM Group, Europe’s biggest airline group, rose 4.7% on optimism its capacity cuts will better match demand.

BHP Billiton, the world’s biggest mining company, gained 1% and Rio Tinto, the third-largest, rose 2.4% as prices of metals revived.

Copper rose for a second day as the greenback weakened and optimism for global economic growth increased.

Copper futures for December delivery rose 2.1% to US$2.8645 a pound on the New York Mercantile Exchange.

Gold futures for December delivery rose 1.1% to US$1,015.50 an ounce in New York.

Crude oil for October delivery rose 1.7% to US$70.89 a barrel on the New York Mercantile Exchange.

Businesswire.co.nz

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