World stocks at 10-month high on optimism

  • Business
  • Tuesday, 25 Aug 2009

LONDON: World stocks powered to a 10-month high yesterday and oil rallied after last week’s upbeat US housing data and optimistic comments from the world’s key central bankers prompted investors to buy risky assets.

Friday’s survey showed sales of previously-owned US homes jumped 7.2% in July to mark the fastest pace in nearly two years.

Bernanke and other central bankers said at the annual gathering in Jackson Hole on Friday that the worst global recession in 70 years was nearing a close, although they warned it would be a long, slow climb back to normal growth.

“The rally seems like building strength again ... This broad rally shows no sign of running out of steam as yet,” said Matthew Buckland, a dealer at CMC Markets.

MSCI world equity index rose 0.7% to reach levels not seen since October. The FTSEurofirst 300 index rose almost 1%.

Tokyo stocks jumped 3.4%, their biggest one-day gain in 3½ months. However, trading was thin, with turnover volume on the Tokyo stock exchange’s first section at its lowest level since July 28.

Investors were also hesitant about taking heavy positions before the Aug 30 general election where many expect the opposition Democratic Party to win.

Emerging stocks rose 1.75%.

“The question of whether the global economy is undergoing a recovery is being answered little by little in the affirmative, as positive economic data last week combined with some relatively upbeat comments from major central bankers over the weekend,” Brown Brothers Harriman said in a note to its clients.

“Further gains in equities ... combined with some strong moves in commodities reflecting the optimism about growth prospects.”

US crude oil rose 0.6% to US$74.31 a barrel, nearing Friday’s 10-month high and supporting oil shares. A storm off eastern Canada also lent support.

The dollar fell 0.2% against a basket of major currencies. — Reuters

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