GLOBAL equity markets fell and the euro slumped to a two-month low on Friday as weak economic data from Europe and China weighed on prices, but Wall Street stocks rebounded on news of surprisingly strong United States manufacturing and consumer sentiment.
Reuters
Government bonds rallied and the dollar rose in safe-haven buying as concerns about imminent US spending cuts and the post-election political stalemate in Rome remained major headwinds for assets considered more risky.
Growth in US manufacturing, which rose at its fastest pace in over a year and a half in February, offset some jitters. The Institute for Supply Management said its index of national factory activity rose to 54,2 from 53,1 in January, topping economists’ forecasts of a pullback to 52,5.
While economic data from Europe and China was disappointing, there are clear signs of economic recovery in the US and some evidence that Japan is beginning to turn around, a potential swing factor in 2013, said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh.
“We can stand back and have a wider discussion if you wish about politics and markets, and another discussion about whether equity prices have gotten ahead of themselves, but as of Friday it was a most reassuring number,” Milligan said of the ISM report.
A report showing US consumer sentiment rose in February as Americans were more hopeful that the labour market will improve provided another sign of optimism, even as confidence in fiscal policy was near all-time lows.
Stocks on Wall Street opened lower, but rebounded after the ISM report and release of the Thomson Reuters/University of Michigan’s final reading on consumer sentiment in February.
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The automatic spending cuts sparked by “sequestration” will take some growth off the US economy, but not enough to push it back into recession, Milligan said.
Standard & Poor’s said it expects the sequester to be temporary and have a mild downside effect on economic growth. A long-term package of spending cuts and revenue increases would be in place by the second quarter, the ratings agency said.
The Dow Jones industrial average .DJI closed up 35,17 points, or 0,25%, at 14 089,66. The Standard & Poor’s 500 Index .SPX was up 3,52 points, or 0,23%, at 1 518,20.
The Nasdaq Composite Index .IXIC was up 9,55 points, or 0,30%, at 3 169,74.
