World stocks jump from 3-month low

By Atul Prakash

LONDON (BestGrowthStock) – World stocks rebounded on Tuesday from three-month lows in the previous day, but caution prevailed ahead of key economic data and rate decisions from the European Central Bank and the Bank of England this week.

Worries over tougher banking regulations and Greece’s deficit situation limited gains, with investors waiting for the European Commission recommendations on the country’s fiscal reform plans on Wednesday before making big trading moves.

At 1207 GMT, the MSCI world equity index (.MIWD00000PUS: ) was up 0.6 percent at 290.13 points after touching its weakest level since early November on Monday. The FTSEurofirst 300 (.FTEU3: ) index of top European shares was also up 0.6 percent, boosted by positive banking and mining stocks.

U.S. stock index futures were all up about 0.2 percent, indicating a firmer open on Wall Street.

“Some of the concerns which have come into the market in recent weeks may be being overly amplified and then we get a positive surprise like yesterday’s ISM number out of the U.S.,” said Peter Dixon, economist at Commerzbank.

On Monday, the Dow Jones industrial average (.DJI: ) shot up 118 points after the Institute for Supply Management’s manufacturing index showed U.S. factory activity grew in January at a faster rate than expected.

But investors are awaiting the U.S. employment report for January on Friday for a clearer market direction. Economists polled by Reuters are looking for a slim gain, probably not enough to put a dent in the 10 percent unemployment rate.

In Europe, more macro-economic figures highlighted a slow pace to economic recovery. The number of workers registered as unemployed in Spain increased by 124,890 in a single month to top 4 million in January.

German retail sales edged up in December after falling more than twice as far in November, making little ground in the final quarter of 2009 and suggesting private consumption will contribute little to growth this year.

EURO INCHES HIGHER

The euro edged higher, supported by an earlier narrowing in Greek government bond yield spreads over German debt as investors a waited for the European Commission’s reaction to Greece’s plan.

Greek Prime Minister George Papandreou said the level of Greek and euro zone bond spreads was completely unjustified, keeping up the rhetoric against speculators he blames for targeting his country.

“Sentiment remains fragile despite the strong U.S. GDP data last week and the Greek situation is still in the background, making investors cautious,” said Paul Robson, currency strategist at RBS.

The euro had pared earlier losses to trade 0.2 percent higher on the day at $1.3950, recovering from a seven-month low of $1.3851 hit on Monday.

The Australian dollar fell after the Reserve Bank of Australia surprised the markets by holding its key cash rate steady at 3.75 percent, against expectations for a rise to 4.0 percent.

The central bank’s move came ahead of Thursday’s policy outcomes from the ECB and the Bank of England. However, the RBA left the door open for more rate rises should the domestic economy continue to improve as expected.

Caution is likely to prevail with White House adviser Paul Volcker due to appear before the Senate Banking Committee later in the day to defend the administration’s proposal to limit risk-trading by banks, which triggered a sell-off in equities when it was first unveiled last month.

According to testimony obtained by Reuters, Volcker will urge Congress to curb the risks taken by large banks to help prevent them from being treated as “too big to fail.”

Among commodities, crude oil prices rose above $75 a barrel on hopes energy demand in China and the United States will grow. Gold rose above $1,110 an ounce, extending the previous session’s 2 percent gains. Base metals also gained.

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(Additional reporting by Neal Armstrong, Naomi Tajitsu and Tricia Wright; Editing by Ron Askew)

World stocks jump from 3-month low