World stocks buoyed by US recovery hopes

[June 19, 2009]  LONDON (AP) -- World stock markets rose Friday after a run of stronger than anticipated U.S. economic data the previous day renewed investors' hopes that the world's largest economy may recover from recession this year.

By mid morning London time, the FTSE 100 index of leading British shares was up 83.29 points, or 2 percent, at 4,364.15 while Germany's DAX advanced 21.13 points, or 0.4 percent, at 4,858.61. France's CAC-40 index was 33.76 points, or 1.1 percent, at 3,227.82.

Investors have been in a cautious mood for most of the week amid mounting concerns that the recent economic news has not been quite good enough to justify the share rally in stock markets since the middle of March. However, strong U.S. jobs and industrial data Thursday helped ease those concerns and contributed to solid gains on Wall Street.

"Economic data continues to strengthen leaving markets with the impression that the current economic rebound is going to be self sustaining," said Hans Redeker, an analyst at BNP Paribas.

"The more this impression is anchored the better the bullish market reaction," he added.

The FTSE outperformed its counterparts in Europe after housebuilder Taylor Wimpey PLC unexpectedly revealed that its order book has risen a massive 73 percent since the end of 2008, a further sign that the housing market has stabilized.

This potential 'green shoot' of recovery comes days after a less bleak assessment of the state of the British economy by the Bank of England and comments from Paul Krugman, the Nobel Prize winner for economics, that Britain is probably the best-placed European economy to rebound from recession.

The stock market rally around the world since March had been fueled by hopes that the U.S. economy will recover from recession sooner than anticipated. As equities usually start rising 6 to 9 months before actual recovery emerges in the official data, this suggests investors believed the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world's major equity indexes are now in positive territory for 2009.

That optimism dissipated in recent days, and despite the relatively upbeat U.S data Thursday, analysts say investors need clearer evidence that the world economy and company earnings are recovering to make sense of stock valuations. In March, many investors saw valuations around the world as particularly cheap and started buying into the market.

Interest rates, particularly on U.S. government bonds have been rising steadily over recent weeks on expectations that the U.S. Federal Reserve will raise borrowing costs sooner than previously anticipated. Meanwhile, oil prices have more than doubled over the past couple of months on hopes that a global economic rebound will boost demand for crude. Oil prices pushed back up towards $72 a barrel, rising 58 cents to $71.95 in European trading.

"While I am a bull longer term I think the rally since March looks overcooked and vulnerable to higher oil prices, upward pressure on bond yields and a reassessment that recovery is around the corner," said Neil Mackinnon, chief economist at ECU Group.

Earlier in Asia, Japan's Nikkei 225 stock average added 82.54 points, or 0.9 percent, to 9,786.26, and Hong Kong's Hang Seng climbed 144.27, or 0.8 percent, to 17,920.93. South Korea's Kospi inched up 0.6 percent to 1,383.34.

Taiwan's key index rose 1.4 percent, while Australia's benchmark inched up 0.2 percent.

Shanghai's index stretched its winning streak with a 0.9 percent gain as the government lifted a nine-month ban on initial public stock offerings.

The moratorium was imposed last year after the country's markets plunged, so Friday's news was seen as vote of confidence in the health of China's markets and economy. Investors also were hopeful the rollout of IPOs would be gradual, the better to avoid a deluge of new offerings that could depress prices in the broader market.

The dollar traded at 97.05 yen compared to 96.65 yen on Thursday, while the euro fell to $1.3901 from $1.3906.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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