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 European stocks <.FTEU3> had a fresh spring in their step as
confirmation that private consumption in Germany picked up last year
and looks set to help drive the economy this year, prompted the
biggest rise of the year so far for Frankfurt's DAX <.GDAXI>.
The German benchmark's 1.3 percent gain was complimented by smaller
but still significant gains on bourses elsewhere in the region,
taking the FTSEurofirst 300 index <.FTEU3> to a fresh 5-1/2 year
high. <.EU>
"German consumption turned out to be especially robust last year,"
said Dekabank economist Andreas Scheuerle. "With the shackles of the
sovereign debt crisis being loosened, this year should lead to
considerably stronger growth."
Data confirmed that private consumption in Germany rose 0.9 percent
in 2013, indicating an underlying strength in Europe's biggest
economy even though headline GDP grew just 0.4 percent for the year.
Wall Street was seen opening up around 0.2 percent, with another
flurry of earnings already in focus, as well as the NY Empire
manufacturing survey, December PPI and Fed Beige Book data later.
<.N>
Helping the better mood overall, the World Bank upgraded its
forecast for global growth this year by two tenths of a point to 3.2
percent, and predicted a faster pace for both 2015 and 2016.
Its view was that the world economy had finally reached a "turning
point" and though it trimmed forecasts for some developing nations,
including China, overall emerging market growth was seen
accelerating to 5.3 percent this year.
Data from China showed new bank lending and money supply growth
missed forecasts for December, suggesting the central bank's efforts
to put the brakes on credit expansion to contain debt levels is
gaining traction.
Shares in Shanghai dipped 0.4 percent <.SSEC>, but there was little
obvious impact elsewhere in the region. Japan's Nikkei <.N225>, once
again helped by a weaker yen, jumped 2.5 percent.
"The performance of advanced economies is gaining momentum, and this
should support stronger growth in developing countries in the months
ahead," said World Bank chief Jim Yong Kim.
U.S. CONSUMPTION ON THE UP
The dollar <.DXY> was also back in vogue. It strengthened to 104.35
yen, leaving behind Tuesday's trough of 103.00. It also firmed
against the euro with the single currency last at a session low of
$1.3605 and 141.90 against the yen.
The U.S. currency had sprung ahead on Tuesday after retail data
soothed worries raised by last week's disappointing payrolls report.
While the headline measure of retail sales rose only a modest 0.2
percent, a core measure favored by analysts beat all expectations
with a jump of 0.7 percent.
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"Growth in final sales, particularly household consumption, appears
to have picked up sharply in Q4," said Barclays economist Peter
Newland. The bank lifted its forecasts for U.S. economic growth in
the quarter to an annualized 3.5 percent.
That combined with a burst of merger activity and earnings beats by
Wells Fargo <WFC.N> and JPMorgan <JPM.N>, a trend that continued on
Wednesday as Bank of America <BAC.N> posted an eight-fold jump in
profits.
CHOPPY MOVES
The better economic and earnings news left 10-year U.S. Treasury
yields little changed at 2.8635 percent, while Germany's growth had
minimal impact on Bund yields. <GVD/EUR>
Spanish and Italian bonds continued their recent strong run as the
European Central Bank said it would not employ 'mark-to-market'
methods in its check on euro zone banks, easing fears local banks
might have been forced into big periphery bond sales.
Price moves in U.S. debt have been choppy recently as the market
tries to second-guess the speed of tapering by the Federal Reserve,
and when it might actually start raising interest rates.
Two of the most hawkish Fed officials, Dallas Fed chief Richard
Fisher and Charles Plosser at the Philadelphia Fed, on Tuesday
advocated pushing on with tapering.
The more dovish head of the Chicago Fed, Charles Evans, will take
his turn to speak later on Wednesday.
In commodity markets, a firmer dollar and rising equities shoved
gold back to $1,237 an ounce, off a high of 1,255.00 hit Tuesday.
Oil prices were softer after a mixed performance overnight. U.S.
crude steadied at $93.12 a barrel, while Brent eased 25 cents to
$106.14.
(Additional reporting by Wayne Cole in
Sydney; editing by Catherine Evans and Susan Fenton)
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