Stocks rally to start second half; bond yields rise

Bareksa.com - Stock markets around the world rallied at the start of the second half of 2014 on Tuesday, propelled by solid U.S. and Chinese economic data and the notion that central banks will keep interest rates low for some time.

The Standard & Poor's 500 index hit an intraday record high at 1,978.58 points, while the Dow Jones Industrial average came within two points of the 17,000 milestone.

Encouraging U.S. and Chinese factory figures pointed to stabilization in the world's two biggest economies, while weaker data on euro zone manufacturing and inflation supported the view the European Central Bank might lower interest rates to help the region's businesses and avert deflation.

"It seems things are clicking," said Jonathan Golub, chief U.S. market strategist at RBC Capital Markets in New York.

There was relief among euro zone banks after France's largest, BNP Paribas, on Monday pleaded guilty and agreed to pay almost $9 billion for violating U.S. sanctions against Sudan and other countries.

The Dow and S&P 500 ended at record closing highs, with the Dow closing up 129.25 points or 0.77 percent at 16,955.85, and the S&P 500 finishing 13.06 points or 0.67 percent higher at 1,973.29. The Nasdaq Composite ended up 50.473 points or 1.14 percent at 4,458.651.  

Top European shares ended up 0.85 percent, while Japan's Nikkei closed up 1.1 percent. 

The MSCI world equity index, which tracks shares in 45 nations, hit a record high of 431.98 before scaling back at bit in late trading at 431.37, up 0.6 percent.    
    
    HOME ON THE RANGE

While Wall Street stocks posted another quarter of gains as of Monday, the dollar and U.S. government bond yields have been rangebound as the U.S. Federal Reserve has shown no sign it will
raise interest rates anytime soon.

Benchmark U.S. 10-year Treasuries yields, a gauge for the U.S. dollar and global borrowing costs, traded at 2.57 percent, up 5 basis points from Monday, which was still at the low end of this year's trading range.

One big market bet for the first half was for a rise in the dollar on the view the Fed is inching towards its first post-crisis rate hike, but this predictions has fallen flat.   

The dollar index fell to a seven-week low of 79.759 on Monday and was a tad above that at 79.814 on Tuesday.

Gold held steady at $1,328 an ounce as fighting in Iraq and Ukraine fed safe-haven demand for the metal, keeping it at a 2-1/2-month high.  

Brent crude finished down 7 cents or 0.06 percent at $112.29 a barrel. U.S. crude settled down 3 cents or 0.03 percent at $105.34 per barrel. (Source : Reuters)