While you were sleeping US consumer gains confidence

Wednesday 29th May 2013

Equities on both sides of the Atlantic advanced after the latest reports on US consumer confidence and house prices bolstered optimism the American recovery is on track.

The Conference Board's sentiment index climbed to 76.2 in May, the highest since February 2008. Separately, the S&P/Case-Shiller index of property values in 20 cities gained 10.9 percent in the year to March, the largest 12-month increase since April 2006.

Some of that consumer confidence was reflected in better-than-expected results for Tiffany in the first three months ended April 30. Shares of the high-end jewelry retailer gained, last up 4 percent, as total sales in the Americas region rose 6 percent to US$408 million, while in the Asia-Pacific region total sales of US$223 million were 15 percent higher than a year ago.

Those data helped ease concern about a potential downgrade in US Federal Reserve monetary stimulus.

"The bottom line is there's been a lot of chatter about how the market's going to respond when the Fed tapers, but home prices are rising, jobless claims are coming down, and the stock market keeps going up," James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, told Bloomberg News.

In late afternoon trading in New York, the Dow Jones Industrial Average rose 0.73 percent, while the Standard & Poor's 500 Index added 0.41 percent and the Nasdaq Composite Index advanced 0.75 percent.

US Treasuries, meanwhile, lost further appeal. Yields on the benchmark 10-year bond increased 12 basis points to 2.13 percent and an auction of two-year government debt lacked lustre.

"We continue to see a large risk appetite," Martin Schlatter, a fund manager at Swiss Rock Asset Management in Zurich, told Bloomberg News. "Many investors have been missing the rally in equity markets and are waiting for an entry. Last week's slump didn't create a fundamentally new situation. Stocks are still significantly more attractive than bonds."

Europe's benchmark Stoxx 600 Index closed with gains of 1.3 percent for the day. Elsewhere, Germany's DAX rose 1.2 percent, while France's CAC 40 added 1.4 percent and the UK's FTSE 100 climbed 1.6 percent.

Helping underpin equity markets were central bank reassurances-in Japan and Europe-that the world's top banking authorities are sticking around to lend a helping hand to reviving growth.

"Even when there is upward pressure on long-term interest rates due to expectations for economic recovery, monetary policy will continue to put downward pressure on interest rates and therefore strongly support economic recovery," Bank of Japan board member Ryuzo Miyao said at a news conference in Tokyo on Tuesday, according to Reuters.

BusinessDesk.co.nz

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