U.S. gains draw world stock index higher, yen rises

By Al Yoon

NEW YORK (BestGrowthStock) – World stocks hovered at six-week highs on Tuesday as hopes of economic recovery helped U.S. equities extend a year-long bull market, while a rising yen signaled some investors are growing more risk averse on nagging worries about European debt levels.

Sterling hit a one-week low against the dollar, weighed by data showing a widening UK trade deficit and comments by Fitch Ratings that the UK sovereign credit profile has deteriorated.

Oil prices slipped back from eight-week highs on Tuesday on expectations of a rise in U.S. crude inventories and a slightly stronger dollar.

Robust corporate performance and upbeat fourth-quarter corporate results on Monday helped investors push the benchmark MSCI world stocks above their break-even level since December. But expectations that the economic rebound could be lackluster for years have kept investors from diving deeper into equities, and sparked some profit-taking.

“Earnings are coming through quite nicely and I think there is still a fair degree of confidence, which is helpful for companies,” said Mike Lenhoff, a strategist at Brewin Dolphin in London. A slight pullback in Europe appeared to be investors booking profits, he added.

The MSCI world equity index (.MIWD00000PUS: ) gained 0.13 percent, erasing losses as U.S. shares firmed at the New York open.

At midday in the United States, the Dow Jones industrial average (.DJI: ) rose 39.45 points, or 0.37 percent, to 10,591.97. The Standard & Poor’s 500 Index (.SPX: ) climbed 4.70 points, or 0.41 percent, to 1,143.20 and the Nasdaq Composite Index (.IXIC: ) increased 15.30 points, or 0.66 percent, to 2,347.51.

One year ago, Wall Street hit a more than 12-year low in the wake of the financial crisis. The Dow has since rallied about 62 percent.

“This past year was one of the most powerful rallies in history, and with the recent gains we’ve had, it makes sense that we’re going to move sideways for a while,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.

Airline and transport stocks rose after UAL Corp’s (UAUA.O: ) chief financial officer said the company’s United Airlines was clearly seeing signs of recovery. UAL gained 8.35 percent to $19, while the ARCA Airline index (.XAL: ) added 3.63 percent.

Shares of Apple Inc (Read more about Apple stock future.) (AAPL.O: ) jumped more than 2 percent to a record high at $224.41 ahead of the company’s iPad launch.

In Europe, the pan-European FTSEurofirst 300 index (.FTEU3: ) closed down 0.09 percent at 1,052.55 points, as banking stocks fell and miners declined on the firmer dollar.

The parent of the Airbus planemaker, EADS (EAD.PA: ) ,lost 2.8 percent after it posted heavy losses in 2009 and scrapped its dividend. It also ruled out a solo bid for a lucrative U.S. tanker contract, leaving Boeing Co. (BA.N: ) closer to snaring the contract worth up to $50 billion. Boeing shares in New York rose 1.1 percent.

U.S. crude oil fell 0.22 percent to $81.69 a barrel, after hitting an eight-week peak above $82 a day earlier. Forecasts for growing U.S. crude inventories tempered recent bullish sentiment.

“Forecasts of yet another build in U.S. crude stocks show the disconnect between the fundamentals of oil supply and demand, which are quite bearish, and hopes of economic recovery, which are bullish,” said Commerzbank analyst Carsten Fritsch.

In other commodities, spot gold prices rose 25 cents, or 0.02 percent, to $1122.20 and the Reuters/Jefferies CRB Index (.CRB: ) fell 0.51 percent.

The dollar (.DXY: ) gained 0.28 percent against a basket of major currencies. The dollar fell 0.38 percent to 89.92 yen while the euro lost 0.39 percent to $1.3575.

The yen was boosted by repatriation flows by Japanese exporters ahead of the fiscal year-end, as well as risk aversion on concerns peripheral euro zone economies could face debt problems similar to those of Greece.

Sterling fell as low as $1.4935 ,and recently traded at $1.4982, down from $1.5066 a day earlier. Fitch also said urgency for fiscal adjustment was greatest for the UK, Spain and France among the larger AAA sovereigns.

U.S. Treasury debt prices rose ahead of a $40 billion three-year note auction as the securities are used as hedges for a heavy slate of corporate bond issuance.

Benchmark 10-year Treasury notes traded 3/32 point higher, pushing their yields down 0.01 percentage point to 3.70 percent.

Stock Market Report

(Additional reporting by Atul Prakash, Harpreet Bhal and Joanne Frearson in London, and Emily Flitter in New York; Editing by Leslie Adler)

U.S. gains draw world stock index higher, yen rises