Commodities help world markets advance

[June 10, 2009]  LONDON (AP) -- World stock markets rose sharply Wednesday amid higher commodity prices and renewed hopes about the state of the U.S. banking sector.

The FTSE 100 index of leading British shares was up 80.44 points, or 1.8 percent, at 4,485.23 with heavyweight mining and oil companies leading the march higher. Germany's DAX spiked 100.09 points, or 2 percent, at 5,097.95 while France's CAC-40 was up 51.87 points, or 1.6 percent, to 3,348.60.

Wall Street futures gained, suggesting a stronger session in the U.S. Dow futures rose 94 points or 1.1 percent, to 8,836 while the broader Standard & Poor's 500 futures climbed 11.3, or 1.2 percent, to 950.90.

Earlier in Asia, stock markets advanced too, with Hong Kong's main index closing 4 percent higher.

After a three-month advance, global markets have showed a lack of direction in recent days as investors fretted about whether the rally would continue through the summer months.

However, the rise in commodity and oil prices has helped mining and oil stocks around the world, while the confirmation from the U.S. Treasury Department that ten of the country's biggest banks will repay nearly $70 billion of bailout money has helped buoy demand for bank shares.

Particularly striking has been the rise in oil prices above $71 a barrel -- a 2009 high -- as investors poured money into crude as a hedge against a weakening U.S. dollar and inflation.

Oil has jumped more than 100 percent in three months as traders have cheered news showing the worst of a severe U.S. recession is likely over, and have brushed off data -- such as a 9.4 percent unemployment rate in May -- that suggest crude demand will remain weak. Even growing inventories have not checked crude's rise.

Benchmark crude for July delivery was up $1.35 at $71.36 a barrel by noon in European electronic trading on the New York Mercantile Exchange. On Tuesday, it jumped $1.92 to close at $70.01.

"There's an overriding hope that the commodity rally is signaling a recovery," said Kirby Daley, senior strategist at Newedge Group in Hong Kong. "But some of the fundamental decay at the core of the economy is still there, so I think investors may be getting ahead of themselves."

Stock markets have rallied strongly over the last three months largely on better than expected economic data, particularly out of the U.S., as well as hopes that the financial sector was stabilizing.

As stocks usually start rising 6 to 9 months before actual recovery emerges in the official economic data, investors have bet that 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.

Despite the improvement in the economic data, concerns linger about the global economy. With interest rates on government bonds edging higher, unemployment continuing to rise and oil prices back near six month highs, investors are concerned about the sustainability of a potential recovery.

As a result, there are worries in the market that if economic data around the world starts to disappoint expectations, then investors may have to revise their recent optimism.

And though the financial system may have been saved from collapse, investors still want more evidence that banks are once again lending to businesses and households. So far, there's very little to show that the lenders are doing anything other than improving their balance sheets.

"Equities are likely to bounce around for the next three months responding to good and bad news on a daily basis before a strong rally in the last quarter," said David Buik, markets analyst at BGC Partners.

Earlier in Asia, Hong Kong's Hang Seng surged 727.17, or 4 percent, to 18,785.66, while Japan's Nikkei 225 stock average gained 204.67 points, or 2.1 percent, to 9,991.49.

Investors in Japan shrugged off news that core machinery orders, a closely watched indicator of corporate capital spending, tumbled to a 22-year low in April as uncertainty about an economic recovery kept companies cautious.

In South Korea, the Kospi advanced 3.1 percent to 1,414.88, Australia's benchmark climbed about 2.3 percent, while Shanghai's main index rose 1 percent.

On Tuesday, the Dow Jones industrial average fell less than 0.1 percent, to 8,763.06, while the S&P 500 rose 0.4 percent to 942.43.

The dollar rose to 97.93 yen from 97.46 yen while the euro climbed to $1.4089 from $1.4053 late Tuesday in New York.

[Associated Press; By PAN PYLAS]

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

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