World stocks start new month on positive note ahead of closely-watched US manufacturing survey

By Pan Pylas, AP
Wednesday, September 1, 2010

World stocks start new month on positive note

LONDON — World stocks started the new month in positive fashion Wednesday after strong manufacturing figures from China and forecast-busting economic growth in Australia shored up optimism despite a disappointing U.S. jobs survey.

In Europe, the FTSE 100 index of leading British shares was up 76.19 points, or 1.5 percent, at 5,301.41 while Germany’s DAX rose 70.60 points, or 1.2 percent, to 5,995.82. The CAC-40 in France was 67.11 points, or 1.9 percent, higher at 3,557.90.

Wall Street was poised for solid gains at the open — Dow futures were up 82 points, or 0.8 percent, at 10,088 while the broader Standard & Poor’s 500 futures rose 10.6 points, or 1 percent, to 1,058.90.

The anticipated gains on Wall Street come despite a survey from the ADP payrolls firm showing that private sector employers unexpectedly cut 10,000 jobs in August, in contrast to expectations of a 30,000 gain.

Alan Ruskin, a currency strategist at Deutsche Bank, said the data has tended not to be a great predictor of late of the official government figures — the August nonfarm payrolls data are due this Friday.

“The market then is unlikely to change its views on Friday’s number, but it will tend to add a degree of security that a major upside surprise is not in store,” he said.

The payrolls data often set the market tone for a week or two, and anything particularly weak could affect whether the Fed decides to introduce additional stimulus measures. At the moment, market consensus is that around 90,000 U.S. jobs were lost in August, but that 30,000 were added, if government census jobs that ended are taken out of the equation. Meanwhile, the unemployment rate is expected to hold steady at 9.5 percent or even rise to 9.6 percent.

How the markets fare over the rest of the day will likely hinge on the Institute for Supply Management’s monthly manufacturing survey — the markets’ expectation is that the purchasing managers index dropped to 53.0 in August from July’s 55.5, in line with the slowdown in economic growth witnessed in other figures.

Wednesday’s rally, which started in Asia, has been largely due to better than anticipated economic data from around the world.

In China, figures from the state-affiliated China Federation of Logistics and Purchasing showed manufacturing growth up for the first time in four months in August. It said its purchasing managers index — a gauge of business activity — rose to 51.7 in August from 51.2 in July. Numbers above 50 show manufacturing activity expanding

Investors were also cheered by figures showing that Australia’s economy grew a seasonally adjusted 1.2 percent in the April-June quarter as demand from China and elsewhere in Asia boosted exports of iron ore and other commodities. The rise, the highest for three years, was more than the 0.9 percent anticipated in the markets.

Australia’s S&P/ASX 200 index, jumped 2.1 percent to 4,495.70 after the growth figures, though China’s Shanghai index dropped 0.6 percent to 2,622.88 as many mainland investors doubted the uptick means the slowdown in China’s rapid growth has been halted.

Meanwhile, Japan’s Nikkei 225 stock average recovered some of Tuesday’s sharp declines — it closed 102.96 points, or 1.2 percent, at 8,927.02 after hitting a 16-month closing low the previous day.

Elsewhere in Asia, Hong Kong’s Hang Seng index rose 0.4 percent to 20,623.83 and South Korea’s Kospi advanced 1.3 percent to 1,764.69.

One outcome of the rebound in stock markets has been a big rise in the euro against the dollar. Over recent weeks, the euro’s fortunes have directly followed the fortunes of stocks — when investors’ appetite for risk is high, they buy shares and move away from the dollar and the yen, widely-considered to be safe haven assets.

By mid-afternoon London time, the euro was 1.1 percent higher at $1.2830.

Meanwhile, the dollar was 0.2 percent lower at 84.97 yen, not far off its 15-year low of 84.61 yen, which was struck last week.

Benchmark crude for October delivery was up 52 cents at $72.44 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.78 to settle at $71.92 a barrel on Tuesday.

AP Business Writer Kelly Olsen in Seoul, South Korea contributed to this report.

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