GLOBAL MARKETS-Stocks gain on enouraging data, Swiss franc drops

17:32, Thursday 11 August 2011

* World stocks bounce as Wall Street opens up

* U.S. jobless claims fall to lowest since April

* Swiss franc drops against dollar, euro

* French banking concerns, funding worries linger (Recasts, adds details, quote, updates prices)

NEW YORK (Xetra: A0DKRKnews) , Aug 11 (Reuters) – Investors swooped back intobeaten-down global stocks on Thursday, encouraged by a surprisedip in the number of Americans claiming new jobless benefits,while the Swiss franc dropped on talk of new official effortsto drive it down.

U.S. and European stocks climbed more than 2 percent,reversing course after steep losses in the previous session.The U.S. economic data and corporate results provided respitefrom the attention on overnight fears about the health of theeuro zone banking system.

But the sanguine view in the equity market contrasted withnervousness in the short-term funding markets, where there weretangible signs of concern. Fears over the health of Frenchbanks intensified European banks’ scramble for dollars, drivingup their dollar borrowing costs to levels not seen since the2007-2009 global credit crisis. For more, see: [ID:nN1E77A0VJ]

Nonetheless, markets were on edge after banking sourcestold Reuters that one bank in Asia had cut credit lines tomajor French lenders while others in the region were reviewingtrades and counterparty risks due to concerns about theexposure of French banks to peripheral euro zone bonds.[ID:nL4E7JB020]

U.S. initial claims for state unemployment benefits fell7,000 to a seasonally adjusted 395,000 last week, the lowestlevel since early April and below economists’ forecasts of400,000.[ID:nN1E77A099]

Analysts cautioned that one week was not enough to showdefinitive improvement in the struggling labor market, but thebetter-than-expected data was a welcome surprise.

“Had we seen a jump (in claims) it would have reinforcedrecession fears. What we’ve seen here is not anything to allaythose fears, but just to set them aside temporarily,” said Bucky Hellwig, senior vice president at BB&T Wealth Managementin Birmingham, Alabama.

The anemic pace of U.S. growth in the first half of theyear has fueled worries of another recession, and analysts areeager to see signs the recovery could pick up steam in the restof 2011.

The dollar and euro soared more than 5 percent versus theSwiss franc after the Swiss National Bank said it could easemonetary policy further. Markets focused on the possibility ofa temporary peg between the franc and the euro to rein in asoaring currency. [ID:nL6E7JB026]

The MSCI world equity index gained 1.3percent, changing course after early losses, and thepan-European FTSEurofirst 300 provisionally closed up2.6 percent. [.EU]

The Dow Jones industrial average gained 249.90points, or 2.33 percent, at 10,969.84. The Standard & Poor’s500 Index was up 29.09 points, or 2.60 percent, at1,149.85. The Nasdaq Composite Index was up 65.87points, or 2.77 percent, at 2,446.92.

Wall Street was also boosted by a surge in Cisco Systems (NasdaqGS: CSCOnews) the day after it forecast a modest increase incurrent-quarter revenue, following months of uncertaintysurrounding its business. Cisco was up more than 16 percent.[ID:nSGE77A03E]


For major stock indexes performance year to date:


Gold slid from record highs as investors cashed in recentgains and after CME Group said it was hiking margins fortrading COMEX gold futures. [ID:nL3E7JA52Y] Spot gold was down 1.8 percent at $1,762.39 an ounce

The euro was last up 5.7 percent at 1.0889francs, compared with a record low of 1.0075 set as recently asTuesday, as investors flocked to safety from slumping stocks.

Societe Generale (Paris: FR0000130809news) , at the center of Wednesday’sstorm that took its shares down more than 20 percent at onepoint, rose 3.5 percent, while BNP Paribas (Other OTC: BNPQF.PKnews) edged up0.2 percent.

“We’re being driven by the news flow out of Europe (Chicago Options: ^REURTRUSDnews) , anduntil we get clarity, it’s hard to get much traction. At thesame time, we’re also very oversold,” said Art Hogan, managingdirector of Lazard Capital Markets in Boston.

“When we hear of steps being taken to address the situationthe market catches a bit of a bid, but then other news willcome out and we sell off. Volatility is really the word of theweek.”

In the credit markets, the cost of insuring French bankdebt hit new records, reflecting worries about the health ofthose banks, which are heavily exposed to troubled euro zonesovereign debt. It pulled back a bit as European marketsclosed.

Societe Generale’s CDS (SNP: ^CDSYnews) costs were last up 8 basispoints on the day to 342 basis points, after earlier trading ashigh as 383 basis points, Markit data show.

that means it would cost 342,000 euros per year for fiveyears to insure 10 million euros in debt. This cost has morethan doubled in the past two weeks.

BNP Paribas’ CDS costs were little changed on theday at 236 basis points, after earlier rising to 256 basispoints, and are up from 110 basis points in early July. CreditAgricole’s swap costs last traded at 271 bps, up from130 basis points in early July, Markit data show.

U.S. government bonds fell sharply in volatile trade. The 30-year Treasury bond fell two points in pricebefore midday in the New York session. It was last 1-14/32lower in price and yielding 3.58 percent, up from 3.52 percentat Wednesday’s close.

The benchmark 10-year Treasury note wasyielding 2.22 percent, up from the 2.14 percent high yield atWednesday’s well-received auction. (Additional reporting by Ryan Vlastelica; Editing by DanGrebler)

GLOBAL MARKETS-Stocks gain on enouraging data, Swiss franc drops

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