World stocks gain as Chinese indicators show growth robust, new bank rules to be phased in

Monday, September 13, 2010

World shares gain on economic optimism

BANGKOK — World stock markets climbed Monday as robust Chinese economic indicators boosted confidence in the economic recovery and the announcement of a gradual implementation of tougher capital adequacy rules lifted banks.

Oil prices, meanwhile, surged above $77 a barrel, extending gains for a second trading day after a leak forced the closure of a Chicago-area oil pipeline and disrupted supplies to U.S. Midwest refineries.

Sentiment in stock markets was bolstered by the China figures which suggested the world’s No. 2 economy isn’t slowing as abruptly as feared. Exporters in many countries, particularly in Asia, are relying on Chinese demand to offset sluggish growth in the U.S. and Europe.

China’s industrial production growth accelerated to 13.9 percent year-on-year in August from July’s 13.4 percent increase. Investment in factories and other fixed assets soared 24.8 percent while retail sales of consumer goods rose 18.4 percent due to better-than-expected auto sales.

“The data … out of China assumes significance particularly at a time when the rest of the world is passing through a soft patch,” Mirae Asset Securities said in a report. “In the main, it provides further evidence of an economy downshifting to a more sustainable rate of growth.”

Markets also welcomed news that global regulators have agreed fundamental banking reforms aimed at averting another financial collapse. The new rules, which will gradually require banks to have greater capital buffers to absorb potential losses, are likely to reshape the credit industry by imposing stricter discipline on credit cards, mortgages and other loans.

Deutsche Bank’s Chief Executive, Josef Ackermann, said at a press conference in Frankfurt on Monday that he thought the Basel III package was a good one.

“I think the decisions that were taken are the right decisions, they go in the right direction, and I also believe the fact that they gave the banking industry so much time for implementation clearly reduces the effects on the real economy, which is also very positive,” he said. “So it’s a well rounded good package that we fully support.”

As trading got started in Europe, Britain’s FTSE 100 was up 0.8 percent at 5,546.80, France’s CAC-40 added 1.2 percent to 3,769.14 and Germany’s DAX was higher by 0.8 percent at 6,263.69. Wall Street was set to gain with Dow futures up 77 points, or 0.7 percent, at 10,470.00. Broader S&P futures advanced 8.6, or 0.8 percent, to 1,113.50.

Japan’s Nikkei 225 stock average paced Asian market gains, jumping 82.87, or 0.9 percent, to 9,322.04. Automakers and tech shares benefited from a softer yen, which triggered buying in exporters. The dollar was trading near the 84-yen level after hitting a fresh 15-year-low last week in the 83-yen area.

Hong Kong’s Hang Seng index added 2 percent to 21,685.73, South Korea’s Kospi rose 0.8 percent to 1,817.79 and Taiwan’s benchmark climbed 2.6 percent at 8,091.30.

Australia’s S&P/ASX 200 advanced 1.1 percent to 4,612.10, led by miners and banks. China’s Shanghai Composite Index gained 0.9 percent to 2,686.51.

In New York on Friday, the Dow Jones industrial average rose 47.53, or 0.5 percent, to close at 10,462.77, extending a rally that began nearly two weeks ago on newfound optimism about the global economy. It was the highest close since Aug. 10. But it’s still only up 0.3 percent this year.

Broader indexes also rose. The Standard & Poor’s 500 index gained 5.37, or 0.5 percent, to 1,109.55, while the Nasdaq composite index rose 6.28, or 0.3 percent, to 2,242.48.

Benchmark crude for October delivery was up 70 cents at $77.15 a barrel in electronic trading on the New York Mercantile Exchange. The contract surged $2.20 to settle at $76.45 a barrel on Friday.

In currencies, the dollar fell to 83.98 yen from 84.07 yen. The euro rose to $1.2815 from $1.2675.

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