While you were sleeping: Optimism rebounds

Thursday 8th March 2012

Equities in Europe and on Wall Street advanced, rebounding from yesterday's drop, as a report showed American companies are hiring more staff than forecast, fuelling hopes for corporate profits.

In Europe, many were relieved that the private holders of Greek bonds have markedly increased their level of participation in a swap required to restructure the country's crushing debt load. The offer expires tomorrow evening.

In early afternoon trading in New York, the Dow Jones Industrial Average rose 0.60 percent, the Standard & Poor's 500 Index gained 0.61 percent and the Nasdaq Composite Index climbed 1.00 percent.

The US private sector added 216,000 jobs last month, according to the ADP National Employment Report. That surpassed economists' expectations and bodes well for February's jobs report, due on Friday.

"After two years of expansion without much gains in employment, we're finally hitting the point where firms need to begin adding people in order to meet increased orders," Steve Blitz, senior economist at ITG Investment Research in New York, told Reuters.

"There are still risks ahead, but if you could just stop the clock right where we are now, you've got a recovery that is gathering some momentum; it appears to be self-reinforcing."

All eyes are now on Friday's data. Economists polled by Reuters forecast a gain of 210,000 in nonfarm payrolls.

Federal Reserve Chairman Ben Bernanke though may be hedging his bets.

The Fed is considering a new type of bond purchase program, according to the Wall Street Journal. The Fed would print new money to buy long-term mortgage or Treasury bonds but tie up that money by borrowing it back for short periods at low rates, according to the report. The goal would be to alleviate concern about future inflation.

The economic optimism helped commodities. The S&P GSCI index of 24 commodities gained 0.6 percent as gasoline, silver and oil climbed.

Shares of Apple gained, rising 1 percent, as investors anticipated the company's presentation of the latest iPad tablet.

In Europe, the mood was better today too amid signs that the restructuring of Greece's sovereign debt might be on track for success after all, avoiding a nasty default that would have ramifications for economies throughout the euro zone.

Investors with 58 percent of the Greek bonds eligible for the nation’s debt swap have so far indicated they’ll participate, according to Bloomberg News.

The government wants a minimum level of 75 percent. The offer ends at 10pm Athens time on Thursday.

Europe's Stoxx 600 Index ended the day with a 0.6 percent increase, while the euro gained 0.3 percent to US$1.3151 and advanced 0.5 percent to 106.60 yen.

Bonds also advanced, pushing yields lower. Yields on 10-year Italian bonds dropped 13 basis points to 4.94 percent and Spanish yields fell six basis points to 5.09 percent.

(BusinessDesk)

BusinessDesk.co.nz

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