March 31, 2023

European and Japanese Central Banks Pledge Support, Boosting Shares and the Dollar

The better sentiment also put Wall Street on course for a higher open when trading resumes after Monday’s holidays in the major centers. All three major stock indexes ended last week in negative territory for the first time since mid-April.

Heightened expectations the U.S. central bank could soon taper its stimulus program unleashed turbulence across the markets last week, leaving it to central banks in Japan and Europe to reassure investors their liquidity taps remain open.

“I expect the major markets to test resistance levels of last week as investors are still seeking higher highs and new record levels in the near term, whilst the central banks are continuing their quantitative easing operations,” said Tom Robertson, senior trader at Accendo Markets.

Equity markets around the world have traded at their highest levels in years encouraged by cheap funding from the Fed and other central banks. But comments last week by Fed chairman Ben Bernanke suggesting a U.S. recovery could bring a shift in policy have made investors question prospects for further gains.

“We have had a significant move higher and now it’s time for taking stock and deciding whether we continue to go higher or we are due a correction,” Michael Hewson, Senior Market Analyst at CMC Markets said.

The question is being asked most about the Japanese market, where the Nikkei stock index had reached a 5-1/2-year high before dropping 7.3 percent last Thursday – its largest one-day loss since the March 2011 earthquake and tsunami.

The Nikkei steadied on Tuesday, ending 1.2 percent higher after long-serving board member Ryuzo Miyao said the Bank of Japan would fine-tune market operations to ensure its unprecedented easing campaign is not derailed.

Central bank officials lifted sentiment in Europe, where the broad FTSE Eurofirst 300 index rose over 1.3 percent by mid-morning, adding to Monday’s 0.3 percent rise. European Central Bank Executive Board member Peter Praet said the ECB could still cut interest rates further to stimulate the economy if needed.

Tuesday’s rebound took Germany’s DAX up 1.1 percent to near recent record highs. In London, the FTSE 100 index was up 1.67 percent, led by banking stocks.

MSCI’s world equity index had risen 0.3 percent by mid-morning, reversing four days of losses.


Assets seen as safe havens fell, leaving the dollar up 0.7 percent against the Swiss franc at 0.9697 francs. “The yen and Swiss franc have dropped noticeably this morning, essentially because risk assets seem to be stabilising,” said Societe Generale currency strategist Alvin Tan.

The euro was down 0.2 percent at $1.2910 against the dollar, trading well within its recent range of $1.28-1.32.

Investors also deserted German government bonds although the talk of an ECB rate cut lent support. The yield on the 10-year bond was down 1 basis point at 1.43 percent.

Commodity markets remain pressured by an uncertain demand outlook after U.S. and Chinese data last week.

The rising dollar also makes some dollar-based commodities more expensive for non-dollar holders. Spot gold was down 1 percent to $1,380.50 an ounce.

However the better tone on equity markets and signs of rising Middle East tension support oil. U.S. crude futures gained 0.7 percent to $94.78 a barrel and Brent rose 1.4 percent to $104 a barrel.

(Additional reporting by Atul Prakash and Anooja Debnath. Editing by Catherine Evans)

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DealBook: Stocks Little Changed as Market Reopens

Mayor Michael R. Bloomberg of New York City on the floor of the New York Stock Exchange on Wednesday.Robert Caplin for The New York TimesMayor Michael R. Bloomberg of New York City on the floor of the New York Stock Exchange on Wednesday.

The major stock indexes were little changed in light trading on Wednesday morning as the market reopened after a two-day shutdown caused by Hurricane Sandy.

A bevy of TV news crews and camera-toting tourists thronged the New York Stock Exchange for the opening, but the trading floor betrayed little that was unusual.

A small crowd enveloped Mayor Michael R. Bloomberg of New York City as he briefly stepped onto the floor to greet exchange workers. He later took to the balcony overlooking the pits to ring the opening bell, flanked by Duncan L. Niederauer, the chief executive of NYSE Euronext, and Robert Steel, a deputy mayor.

As the familiar clang rang through the hall for the first time this week, a small cheer erupted from the floor.

The dozen staffers at “the ramp,” an important N.Y.S.E. nerve center on the floor, scanned a wall of monitors to check on market activity.

Hurricane Sandy Multimedia

S and P 500 Index
Duncan Niederauer, chief executive of NYSE EuronextLucas Jackson/ReutersDuncan Niederauer, chief executive of NYSE Euronext.

Milling about the floor was Lawrence E. Leibowitz, NYSE Euronext’s chief operating officer, checking on the state of operations. It was his second straight day at the exchange, having slept there overnight after wading from his home to Wall Street.

“There have been very few, very isolated problems,” Mr. Leibowitz said. He pointed to blank monitors that were shut off because the data provider was delivering incorrect market data.

“If that’s the worst of our problems,’ he added, “we’re in good shape.”

Mr. Niederauer seemed pleased as well. Wednesday was his first day back at the exchange since last week, having worked remotely because he could not come into the city.

“We’re pleased to see the turnout of staff,” he said, with many market makers being nearly fully represented.

He said many technical issues had been resolved, though technicians from Verizon were on hand to patch spotty communications and network connections. Many trading firms resorted to sharing working Internet and phone lines, while specialists ducked outside to get cellphone service unavailable on the floor.

At midday, the Dow Jones industrial average was down 0.11 percent, while the Standard Poor’s 500-stock index was 0.16 percent lower and the Nasdaq composite index was off 0.55 percent.

Several specialists said that in some ways, the morning had been easier than expected. Commuting was smoother, they said, with little traffic on the roads. And the exchange provided special dispensation to park on nearby streets.

Jonathan D. Corpina, a senior managing partner at Meridian Equity Partners, came armed with a flashlight to navigate the darkened streets of Lower Manhattan. But he found it easy to find the exchange, which was illuminated thanks to backup generators, and dive into work.

“We’re here filling orders, and it’s business as usual,” he said.

Another trader, Peter Costa, said he had noticed little that was out of the ordinary, except perhaps slightly lower volume.

“To me, this feels like a Monday,” he said, “but on a Wednesday.”

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U.S. Economy Picks Up Pace, Averting a Stall

Consumers spent more, especially on health care and utilities, and businesses invested more, in software and vehicles among other items, spurring the fastest growth in a year. The nation’s total output of goods and services grew at an annual rate of 2.5 percent from July to September, almost double the 1.3 percent rate in the previous quarter, the Commerce Department estimated on Thursday.

That pace is not brisk enough, however, to recover the ground lost in the economic bust, relieve unemployment or even entirely dispel fears of a second recession.

“It ain’t brilliant, but at least it’s heading in the right direction,” said Ian Shepherdson, the chief United States economist for High Frequency Economics, a data analysis firm. “I want to see 4 percent, but given that people were talking about a new recession, I’ll take 2.5 or 3.”

Investors embraced the domestic report and a broad agreement struck by European leaders to resolve their debt crisis, causing some major stock indexes to soar by 5 and 6 percent in Europe and by around 3 percent in the United States, where the Dow Jones industrial average closed above 12,200.

Still, one did not have to look far to find cautionary signs in the American economic report. Economists do not expect growth to accelerate in the next few quarters to the point that it drives the unemployment rate well below 9 percent. The improvement is simply not enough to be perceptible to anxious American families.

“For most people, they’re unable to really make a distinction between a recession and just 2 percent growth, which means the economy is growing so weakly it can’t hire enough people to make a dent in unemployment,” said Bernard Baumohl, the chief economist at the Economic Outlook Group.

A 2.5 percent growth rate may be hard to sustain, noted Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, which tracks consumer and executive sentiment. Real income is declining, housing prices are stalled and, as the National Association of Realtors reported on Thursday, home sales in September were down for the third consecutive month. Personal disposable income, adjusted for inflation, fell 1.7 percent in the third quarter, its biggest drop since the third quarter of 2009.

While income was falling, consumer spending rose at an annual rate of 2.4 percent, more than triple the rate in the second quarter.

So where did the money come from? Consumers put away less in savings, and credit card debt inched upward.

“That is unlikely to continue if the economy grows weakly because Americans are much more conscious about adding on a lot of debt to their balance sheet,” said Ms. Bostjancic, who added that the negative outlook had begun to spread to businesses.

“C.E.O. confidence is starting to melt away, along with consumer confidence levels, which have always been low,” she said.

Car sales were strong in July, August and September, and many analysts pointed to those numbers as evidence that consumers were confident enough to take out loans. But the seasonally adjusted number in Thursday’s report showed a slight decline in consumer spending on cars, leading economists to speculate that businesses were responsible for the increase in sales.

Most of the increase in consumer spending was instead driven by nondiscretionary expenses like health care, according to an analysis by David A. Rosenberg, chief economist for Gluskin Sheff, a wealth management firm. “We can understand why consumer confidence has sunk,” he wrote, “when spending on essentials such as utilities and medical bills have to be funded by drawing down the personal savings rate.”

Declines in the savings rate as large as the one reflected in the report — one percentage point, to 4.1 percent of income — are rare, and more than half the time, they herald recession, Mr. Rosenberg said.

Businesses increased their capital investments at a 17.4 percent annual rate. Business spending has been strong throughout the recession, a hopeful sign because investment in factories, offices, equipment and software often precedes hiring.

Some economists also saw a bright spot in inventories, which grew less than expected in the third quarter. That most likely means there are few excess goods piled up, and businesses may need to replenish their inventories in the fourth quarter, producing stronger growth.

This article has been revised to reflect the following correction:

Correction: October 27, 2011

An earlier version of this article gave an incorrect name of the company where Nigel Gault works.  It is IHS Global Insight, not HIS Global Insight. 

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