The development, as well as European economic data released on Wednesday, went to the heart of a number of the issues facing investors — how to gauge the euro zone’s approach to its debt crisis and the pace of global economic growth.
On Wall Street, bank stocks led the indexes higher, but analysts were cautious about the prospects for the gains to stick, given recent volatility.
“It is a bit of a relief rally,” said Paul Zemsky, the chief investment officer of multiasset strategies for ING Investment Management. There was “a favorable outcome” to the German court ruling and the market was responding, he said, “but we need to see follow through.”
In addition, better industrial data from Germany provided some support, Mr. Zemsky said. German industrial production surged 4 percent in July, above expectations and reversing a decline in June. Still, the country must cope with slack demand.
“It looks like the economies around the world are slowing, not stopping,” he said.
Bank stocks in particular have been strongly affected. They took a hit on Tuesday as concerns about the debt crisis in Europe and global economic growth sent financial markets down. But they were off their lows on Wednesday in both Europe and the United States, surging more than 3 percent by noon.
Corporate news also propelled trading in key sectors.
Bank of America was the most actively traded financial stock, and it rose just over 5 percent. The bank shook up its top management team on Tuesday as it contended with a flagging share price and mounting legal liabilities.
Other corporate news had an impact on trading. The technology sector in the broader market rose solidly, led by Yahoo, which was up more than 5 percent. The company’s chief executive, Carol A. Bartz, was fired Tuesday, ending a rocky two-year tenure in which she tried to revitalize the online media company.
By noon, the three main indexes in the United States were all higher. The Dow Jones industrial average of 30 stocks was up 1.6 percent, and the Standard Poor’s 500-stock index and the Nasdaq composite index were each up just over 2 percent.
The Treasury’s benchmark 10-year note yield rose to 2.02 percent from 1.98 percent late Tuesday.
The gains on Wall Street on Wednesday, if they hold, would reverse the losses that were carried over from last week’s disappointing report on United States unemployment and news that major American banks were facing a federal lawsuit related to their handling of mortgage securities.
Still, analysts cautioned that investors would stay nervous, and markets volatile, as the euro-zone debt crisis plays out and concerns about the pace of growth in the United States and Europe linger.
HSBC hammered home the point on Wednesday that global economic fundamentals were significantly weaker now than before.
The bank’s team of economists lowered their growth forecasts for this year and next, with particularly marked revisions for the developed world. They forecast that developed economies would expand just 1.3 percent this year, down from a previous projection of 1.8 percent. Growth in emerging economies is likely to hit 6.2 percent, rather than 6.3 percent, they said.
“The developed world has succumbed to economic permafrost,” the team, headed by the global economist Stephen King, wrote in its report. “The message is simple: despite massive policy stimulus, healthy economic recovery is now but a distant dream.”
But the German court ruling was bringing momentary relief to financial markets, said Carsten Brzeski, an analyst at ING in Brussels, “as a total chaos scenario has been avoided.”
But he warned against “euphoria” at the development. “A bigger say for the German Parliament in future bailouts could easily find copycats in other euro-zone countries, undermining the clout of the beefed-up” European bailout fund, he said.
“I wouldn’t overplay the German decision,” said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh.
There was some relief in the markets because the announcement “removed one hurdle to an overhaul of the European problem,” he said, “but it is still extremely uncertain how the overall situation will play out.”
He added that it was unlikely that bonds of the noncore euro-zone members would pick up much momentum from the court decision.
“You might still want to hold German bonds,” he said, “but do you really want to hold other European bonds?”
In afternoon trading, the Euro Stoxx 50 rose 3.4 percent, although it is still down more than 20 percent for the year. In Britain, the FTSE 100 index rose 3.1 percent. The CAC 40 in France was up 3.6 percent and the DAX in Germany rose more than 4 percent.
The Nikkei 225 index in Japan, which closed at its weakest level since April 2009 on Tuesday, recouped some of the previous session’s losses with a rise of 2 percent.
The Japanese central bank kept interest rates unchanged at their already ultra-low levels, and announced no new economic stimulus measures at the end of its policy meeting on Wednesday — though pressure for more action is mounting. In Australia the economy expanded by 1.2 percent in the second quarter from the previous period, against expectations of a gain of 1 percent.
In Australia, the S. P./ASX 200 closed 2.7 percent higher. The Hang Seng in Hong Kong closed up 1.7 percent, while the Shanghai composite index gained 1.8 percent.
The dollar was mostly lower against other major currencies. The euro rose to $1.4033 from $1.3998 late Tuesday in New York, while the British pound rose to $1.5987 from $1.5944. The dollar fell to 77.20 yen from 77.66 yen.
The dollar was also at 0.8580 Swiss franc, down from 0.8622 franc. The Swiss currency was hovering around 1.20 to the euro after the Swiss national bank on Tuesday surprised investors by saying it would seek to cap the Swiss franc’s value at that level — a move intended to cushion Swiss exporters from the impact of the currency’s strong rise in recent months.
Comex gold was down 3 percent at $1,817. Crude traded in New York was about 3 percent higher at $88.93.
Matthew Saltmarsh reported from London and David Jolly from Paris. Bettina Wassener contributed reporting from Hong Kong.
Article source: http://www.nytimes.com/2011/09/08/business/daily-stock-market-activity.html?partner=rss&emc=rss