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GLOBAL MARKETS-Stocks edge up; key central banks on investors' minds

Steven C. Johnson
Monday, 4 Nov 2013 | 4:19 PM ET

* Wall Street builds on four weeks of gains

* ECB meeting, U.S. jobs report in focus

* Euro off 6-week low, shares firm on solid factory data

* Gold, oil seen vulnerable to Fed tapering expectations

NEW YORK, Nov 4 (Reuters) - Major world stock indexes rose on Monday, with the S&P 500 extending a four-week winning streak, while European manufacturing data helped the euro recover from a six-week low.

At the same time, a report showing a drop in U.S. business investment in September clouded views on when the Federal Reserve will start withdrawing its stimulus spending.

The European Central Bank, meanwhile, is widely expected to ease monetary policy further, with some market participants believing it could cut its benchmark interest rate this week.

Even an acceleration in euro zone factory production last month was not enough to dash those expectations as the sector was fragile compared with historical levels.

"The bias remains for (the ECB) to ease, as markets drive the ECB to address disinflationary pressures," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

The euro rose 0.3 percent at $1.3520 while Europe's broad FTSEurofirst 300 index closed 0.3 percent higher, leaving it near last-week's five-year high.

Predicting the U.S. Federal Reserve's next move has proved a bit trickier. Upbeat U.S. factory data last week stirred talk that the Fed could start winding down its stimulus program as soon as next month rather than waiting until March. That has supported the dollar and capped oil prices.

But St. Louis Fed President James Bullard on Monday said the central bank need not rush because inflation remains low.

Another top official, Fed Board Governor Jerome Powell, said the timing of the eventual decision to slow the central bank's monthly bond purchases "is necessarily uncertain, as it depends on the evolution of the economy."

Data so far have been inconclusive, and economists expect growth likely slowed to a 1.9 percent rate in the third quarter from 2.5 percent between April and June.

On Monday, the Commerce Department said new orders of non-military capital goods other than aircraft, an indicator of business spending plans, fell 1.3 percent during the month.

"Whether it happens in December or the next several months, investors are keenly aware that it will happen and at some point that dynamic will end," Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey, said of the Fed's tapering.

The Dow Jones industrial average closed 23.57 points, or 0.15 percent, at 15,639.12. The Standard & Poor's 500 Index rose 6.29 points, or 0.36 percent, to 1,767.93. The Nasdaq Composite Index ended up 14.55 points, or 0.37 percent, at 3,936.59.

Fed stimulus has been a boon for Wall Street over the last few years; the benchmark Standard & Poor's 500 index is up 23.7 percent this year and last week closed at a record high.

U.S. government bond prices rose slightly, with the 10-year note up 4/32, to yield 2.61 percent.

A weekend report pointing to expansion in China's giant service sector did little to invigorate Asian markets. MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2 percent while Tokyo markets were closed for a holiday.

The MSCI world equity index, which tracks shares in 45 nations, was 0.3 percent higher.

The global growth picture should get clearer later this week with Friday's release of the U.S. October payrolls report. Economists are betting that uncertainty over the partial government shutdown last month held hiring to a modest 125,000.

If that resulted in a higher jobless rate, the Fed might be inclined to wait until next year to ease up on its stimulus.

Spot gold prices fell 88 cents to $1,313.80, while U.S. crude slipped 14 cents to $94.47 per barrel.

In fixed income markets, bets on lower euro zone rates lifted core and lower-rated euro zone bonds, though analysts debated which policy tool the ECB might choose.

Along with a cut in its benchmark rate, the ECB could drop the deposit rate below zero, which would have a bigger effect on money markets. It may even promise another long-term refinancing operation of banks. 1/8ID:nL5N0IN04N 3/4

"I'd be surprised if they don't do something before year-end," said Simon Smith, chief economist at FXPro.