While you were sleeping: China signals rebound

Tuesday 11th December 2012

Wall Street moved higher amid promising data on China's economy, fuelling hopes that the world's second-largest economy is gathering steam again.

China offered better-than-expected data on both industrial output and retail sales, welcomed by a market that is on tenterhooks about US budget talks aimed at avoiding the US$600 billion in tax increases and spending cuts scheduled to kick in on January 1.

"China hit that trough and is starting to see an acceleration of growth," Tom Wirth, who helps manage US$1.6 billion as senior investment officer for Chemung Canal Trust, in Elmira, New York, told Bloomberg News.

Meanwhile, no details were offered on yesterday's meeting between US President Barack Obama and Republican House Speaker John Boehner about an agreement to avoid the so-called fiscal cliff -- and a potential recession for the world's largest economy.

A study by the US National Intelligence Council, however, predicted that China's economy will take over the top spot from the US before 2030.

In afternoon trading in New York, the Dow Jones Industrial Average was up 0.25 percent, the Standard & Poor's 500 Index gained 0.16 percent, while the Nasdaq Composite Index advanced 0.31 percent.

Better-than-expected November sales data for McDonald's lifted its shares 1.3 percent, following a dismal October during which sales declined for the first time in nine years. Global sales at restaurants open at least 13 months increased 2.4 percent last month.

"One month does not a trend make ... but it's a nice sign to see them rebound after a horrible October," ITG Investment Research analyst Steve West told Reuters.

Investors are eyeing a two-day meeting by Federal Reserve policy makers starting tomorrow.

In Europe, the Stoxx 600 Index eked out a 0.1 percent gain from the previous close. It's at the highest level in 18 months, according to Bloomberg. National benchmark stock indexes also rose in London, Paris and Frankfurt.

Italian Prime Minister Mario Monti's unexpected announcement over the weekend that he plans to resign soon after lawmakers approve his budget plan later this month sent the nation's stocks and bonds lower. Italy's FTSE MIB stock index dropped 2.2 percent, while the yield on the country's 10-year bond was last up 29 basis points at 4.82 percent.

Elections may be held as early as February -- one to two months earlier than expected. European political and financial leaders today pressed for the next Italian government to hold fast on the reforms initiated by Monti. Still, the uncertainty may increase wariness among investors.

"The underlying cracks within the euro zone are actually widening," Georg Grodzki, head of credit research at Legal & General Investment Management in London, told Bloomberg. "Investors will be reading Italian politicians' lips very, very closely."

BusinessDesk.co.nz

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