AStocks surged on Thursday on a combination of surprisingly strong US economic data and the overwhelming approval by Germany’s parliament of a bill to strengthen a bailout fund intended to help European countries deal with their debts.
News that the US economy grew by more than previously thought in the second quarter of the year and a surprisingly large drop in weekly jobless claims were the main catalysts behind the advance. Stocks are a leading indicator of future economic activity and the better than expected US economic data has reined in fears over the global economic recovery.
But news that the US economy grew at an annual rate of 1.3 per cent in the April-June quarter, up from an estimate of 1 per cent made a month ago has calmed some investor fears about the world’s largest economy, especially as the improvement largely reflected more consumer spending.
Further good news emerged from the Labour Department, which found that jobless claims last week dropped 37,000 to a seasonally adjusted 391,000, the lowest level since April 2. It’s the first time applications have fallen below 400,000 since Aug.6. and the figures could prompt investors to upgrade their forecasts for next week’s nonfarm payrolls figures for September.
The mood in stock markets had already been largely positive after a clear victory for Chancellor Angela Merkel in a vote on beefing up Europe’s bailout fund. More encouraging for the markets, perhaps, was the fact that Merkel did not have to rely on support from opposition parties.
Germany to contribute more than others to boosting the firepower of the bailout fund, the so-called European Financial Stability Facility, or EFSF. If passed, Germany will be guaranteeing loans in the future for up to $288 billion, rather than 123 billion so far.
In Europe, Germany’s DAX was up 1.8 per cent at 5,678 while France’s CAC-40 rose 2 per cent to 3,055. The FTSE 100 index of leading British shares was underperforming, trading up 0.2 per cent to 5,230.
US stocks opened sharply higher the Dow Jones industrial average was up 1.8 per cent at 11,214 while the broader Standard & Poor’s 500 index rose by the same rate to 1,171.
Earlier in Asia, Japan’s Nikkei 225 index swung between gains and losses before finishing up 1 per cent to 8,701.23. South Korea’s Kospi index shot up 2.7 per cent to 1,769.29. China’s Shanghai Composite Index dropped 1.1 per cent to 2,365.34. Markets in Hong Kong were closed due to severe weather.
The Gulf Today