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GLOBAL MARKETS-Shares gain on stimulus hopes; Spain caps rise

by on September 25, 2012 4:08 pm BST
 

Tue Sep 25, 2012 12:08pm EDT

* Stock markets rise, U.S. buoyed by consumer confidence

* Brent oil hits $111 a barrel on Middle East tensions

* Stimulus expectations underpin markets

NEW YORK, Sept 25 (Reuters) – Stocks edged higher around the
world on Tuesday, with U.S. markets in particular buoyed by
end-of-quarter buying by funds and a higher-than-expected
reading of confidence among American consumers.

However, lingering concerns over Spain’s funding problems
and renewed worries about global growth limited gains.

U.S. stocks rose at the open after comments late on Monday
from the president of the San Francisco Fed suggested the
central bank was not done taking action to stimulate the economy
.

But a pessimistic outlook from Caterpillar capped
gains and some investors cautioned the advance may be due to
window-dressing for the end of the quarter.

U.S. stocks were supported by a private sector report
showing U.S. consumer confidence jumped to its highest level in
seven months in September as Americans were more optimistic
about the job market and income prospects.

The MSCI world equity index rose 0.4 percent
to 337.48. European shares also gained 0.4 percent.

“A lot of people are buying equities today because they’ve
been underexposed to the market. It isn’t necessarily a call on
fundamentals,” said Nicholas Colas, chief market strategist at
the ConvergEx Group in New York.

“Money managers who haven’t believed in the rally don’t want
to compound that error by showing a lack of exposure at the end
of the quarter.”

The Dow Jones industrial average was up 26.41 points,
or 0.19 percent, at 13,585.33. The Standard & Poor’s 500 Index
was up 2.58 points, or 0.18 percent, at 1,459.47. The
Nasdaq Composite Index was up 7.12 points, or 0.23
percent, at 3,167.90.

Caterpillar shares fell 2.1 percent in New York
trade. Just minutes before markets closed o n M onday, Caterpillar
Inc cut its 2015 profit outlook, warning that weaker commodity
prices would result in a bigger-than-expected decline in demand.
[ID: nL1E8KOGZR].

EURO HIGHER

U.S. data showed single-family home prices rose for a sixth
month in a row in July, though the improvement was not as strong
as expected and had minimal impact on trading.

The euro rose 0.3 percent at $1.2965, still about two
cents from the 4-1/2-month peak posted last week after the U.S.
Federal Reserve announced further quantitative easing earlier
this month.

The euro extended gains against the greenback after the U.S.
consumer confidence data. The overall support for the single
currency rally in recent weeks was the European Central Bank’s
offer to provide bailout funds to indebted governments – if they
seek its help and are willing to accept tough conditions.

But investors were not making huge bets.

“Fears about Europe’s situation remain among investors, with
the focus mostly on Spain, but Greece is also still a concern,”
said Kimihiko Tomita, head of foreign exchange for State Street
Global Markets in Tokyo.

At the center of market concerns is what happens next in
Spain, where the government is due this week to present its
draft budget for 2013, outline new structural reforms for the
economy and release the results of stress tests on the banking
sector.

There are also concerns about Greece, which is due to hear
soon from the “troika” of international lenders – the IMF, ECB
and European Commission – on the prospects of further loans to
finance government outlays.

U.S. Treasury debt prices were lower. The benchmark 10-year
U.S. Treasury note was down 3/32, the yield at
1.7233 percent.

GROWTH CONCERNS

After the recent central bank actions, many investors have
become convinced that markets can rally further. But they
believe any gains are highly dependent on signs the slowdown in
the global economy has bottomed.

“The majority of central banks are in total, outspoken
reflationary mode. That’s a big story,” said Didier Duret, chief
investment officer at ABN Amro Private Banking in London.

“They are intervening actively for a very clear reasons: to
support the economy in the U.S., to support the funding in
Europe and to support also the economies in emerging markets.”

Duret said the main trigger for the next move up will likely
be signs of a strengthening U.S. recovery.

Oil drew some support from the rise in tensions in the
Middle East.

Washington on Monday cleared the path for tighter sanctions
against Iran to curb its nuclear ambitions, while Tehran renewed
its rhetoric against Israel, intensifying worries about a
conflict between the two that could have an impact on crude
supplies from the region.

These worries sent Brent crude futures up 1.1
percent to $111.00 per barrel. U.S. crude was up $0.94 to
$92.86 a barrel.