Stocks Rise as Appetite for Risk Grows

Stock rose on Monday, buoyed by the formation of a broad coalition government in Italy which ended two months of political uncertainty and bolstered an appetite for risky assets, while better-than-expected housing data raised market optimism.

In afternoon trading the Standard Poor’s 500-stock index rose 0.9 percent, Dow Jones industrial average rose 0.9 percent, and the Nasdaq composite gained 1.1 percent.

Wall Street was following European shares, which moved higher on Monday after Italy finally formed a government, although analysts saw the gains dwindling in the near term.

Feeding risk into markets, the United States dollar fell against a major basket of currencies, while commodities like spot gold rose.

“The market is moving up as the Italian political situation is finally unlocked and that’s offering some hope. You can see that boosting risk trade here,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

In macroeconomic news, data from the Commerce Department showed that personal income rose 0.2 percent, slightly higher than expected, while contracts to purchase previously owned homes in the United States rose in March as the housing market continued to pick up pace this year.

The Labor Department’s nonfarm payrolls report for April is due on Friday.

“We have key economic data, especially the employment report later in the week, and we are also going to hear from the E.C.B. and the Fed later, so earnings takes a back seat this week,” Mr. Cardillo said.

So far, the S.P. 500 is up 0.8 percent this month.

Data showing weak growth in the United States has raised expectations the Federal Reserve will keep its pace of bond buying at $85 billion a month during its policy-making meeting announcement on Wednesday, while the European Central Bank is widely expected to announce an interest-rate cut when it meets on Thursday.

In Europe, a resolution of Italy’s two-month political stalemate through the formation of a new coalition government at the weekend boosted sentiment on the bonds of heavily-indebted euro zone governments and the share market.

Italy’s five- and 10-year borrowing costs fell to their lowest level since October 2010 at a bond sale on Monday, while secondary market yields dropped 10 basis points to 3.97 percent.

The main Italian share index, the FTSE MIB, ended the session up 2.2 percent, and the broad FTSE Eurofirst 300 index of top European shares gained 0.5 percent, adding to its 3.7 percent gain last week.

The market saw little reaction to data showing confidence in the euro zone’s economy falling for a second straight month in April, which only added to poor German business confidence data revealed last week.

Germany’s DAX closed up 0.8 percent while France’s CAC 40 was 1.5 percent higher.

Asian indexes were generally higher, although trading volumes were low with markets in Japan and mainland China closed for a holiday. In Hong Kong the Hang Seng ended the session up 0.2 percent.

Article source: http://www.nytimes.com/2013/04/30/business/daily-stock-market-activity.html?partner=rss&emc=rss