GLOBAL MARKETS-Shares resume upward trend on China data; euro hits fresh two-year peak

Angela Moon
Thursday, 24 Oct 2013 | 3:47 PM ET

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* China's factories expand at best pace in seven months

* Euro gains as bearish dollar sentiment persists

* Wall St gains as Fed hopes offset mixed earnings

NEW YORK, Oct 24 (Reuters) - Global equity markets resumed their recent upward trend on Thursday, boosted by signs of growth in Chinese manufacturing, while the euro rose to a fresh two-year peak against the dollar.

On Wall Street, the S&P 500 index was on track for its tenth gain in the past 12 sessions as expectations for steady accommodative monetary policy for the foreseeable future offset a mixed batch of earnings and economic data. The benchmark index closed at a record on Tuesday.

Boosting investors' appetite for risky assets was data showing growth in China's vast factory sector reached a seven-month high this month, easing concerns about a slowdown in Chinese exports, which would point to weakening global demand.

But U.S. manufacturing output fell for the first time in four years while the euro zone economy lost momentum, surveys on Thursday showed, suggesting the world economy is still facing speed bumps as China tries to rebound from a slowdown and as growth in advanced economies remains fragile.

In the currency market, the euro rose to a fresh two-year peak against the dollar on Thursday as concerns about the outlook for the U.S. economy and monetary policy outweighed weaker euro zone data.

U.S. corporate earnings continue to pour in, with 47 S&P 500 components reporting on Thursday, including Microsoft Corp and Amazon.com Inc after the close of trading.

So far, the prospect of continuing easy money was enough to offset an earnings season marked by some weak outlooks and tepid revenue growth. Shares of Dow Chemical Co, Xerox Corp and AT&T Inc all fell following results on Wednesday, though Ford Motor Co was a bright spot.

"I think people want to stay invested around earnings so they don't miss upside surprises. My view on earnings is it's a bit of speculation (on whether) the report will come out way above expectations," said Bruce Zaro, chief technical strategist, Delta Global Asset Management in Boston.

Yields on benchmark U.S. Treasury securities held near three-month lows on Thursday as expectations that the Federal Reserve is still months away from reducing the size of its $85-billion-a-month bond-purchase program kept up strong demand for the debt.

Fed policy is seen as very data-dependent, though economic indicators over the coming months are likely to be skewed by the effects of the government shutdown. That could limit insight on the state of the economy and to what degree the shutdown and the fight over raising the debt ceiling harmed growth.

"What we've been seeing since the government shutdown and debt ceiling was resolved is a desire to jump back into Treasuries," said Jason Rogan, managing director in Treasuries trading at Guggenheim Partners in New York.

"Most market participants are of the mind that the Fed is on hold for the foreseeable future."

Benchmark 10-year Treasuries were last down 7/32 in price to yield 2.5106 percent, near the three-month lows of 2.47 percent set on Wednesday.

On Wall Street, the Dow Jones industrial average was up 103.00 points, or 0.67 percent, at 15,516.33. The Standard & Poor's 500 Index was up 6.54 points, or 0.37 percent, at 1,752.92. The Nasdaq Composite Index was up 22.82 points, or 0.58 percent, at 3,929.89.

European shares recovered their poise, climbing back toward five-year highs on strong corporate results and the encouraging manufacturing data from top metals consumer China.

The pan-European FTSEurofirst 300 index rose 0.5 percent to 1,285.89, recovering from the previous session's fall and climbing back toward Tuesday's five-year highs of 1,291.93.

MSCI's world equity index added 0.3 percent, slightly retracing losses of 0.6 percent on Wednesday, when markets were rocked by fears that a spike in Chinese short-term rates could hurt growth.

The euro was up 0.2 percent at $1.3802, having hit $1.3824, its strongest since November 2011. The dollar fell broadly, hitting a near nine-month low against a basket of currencies of 79.081. It was last down 0.1 percent at 79.166.

In commodities trading, spot gold rose 1.4 percent to $1,350.06 an ounce, having earlier hit $1,351.61, its highest since Sept. 20.

The U.S. crude oil benchmark snapped three sessions of losses and ended the day 25 cents higher at $97.11 a barrel, after touching a four-month low of $95.95. Brent crude oil ended 81 cents lower to $106.99 a barrel, a fresh two-month settlement low.