World stocks rise on optimism

By Alina Selyukh

NEW YORK (BestGrowthStock) – World stocks climbed on Wednesday to two-year highs on growing optimism about U.S. economic growth while the euro slumped to lifetime lows versus the Swiss franc after a new round of credit rating warnings reminded traders euro-zone debt problems can still flare.

Oil prices topped $90 a barrel, hitting a 26-month peak as the latest U.S. data showed a third straight weekly drop in U.S. crude inventories and a cold snap on both sides of the Atlantic prompted pre-holiday buying.

The euro drifted to its weakest level since its 1999 launch against the Swiss franc, deemed a safe-haven currency. The euro fell (Read more about the trembling euro. ) below 1.25 Swiss francs in a sixth consecutive day of losses after Moody’s warned it may cut Portugal’s credit rating and Fitch said it may downgrade Greece, the latest in the wave of downgrade warnings on euro-zone nations.

But U.S. investor sentiment was as bullish as ever, with stocks on a tear as money managers reallocated capital in anticipation of improving economic data and robust corporate earnings, according to a Reuters poll.

U.S. stocks (Read more about the stock market today. ) rode the advances in the financial sector into a fifth-straight session of gains, rising to levels not seen since before Lehman Brothers went bankrupt on-September 15, 2008.

The Dow Jones industrial average (.DJI: ) gained 26.33 points, or 0.23 percent, to close at 11,559.49, after reaching an intraday high at 11,566.99. The Standard & Poor’s 500 Index (.SPX: ) rose 4.24 points, or 0.34 percent, to 1,258.84, after climbing as high intraday as 1,259.39. The Nasdaq Composite Index (.IXIC: ) edged up 3.87 points, or 0.15 percent, to close at 2,671.48, after earlier hitting an intraday peak at 2,675.26.

After lagging during most of the year, financial stocks have been feeding the U.S. stock market’s rally. Bank of America Corp (BAC.N: ) rose 3.1 percent to $13.38 and JPMorgan Chase & Co (JPM.N: ) climbed 2.8 percent to $42.16, giving the greatest boost to the Dow industrials.

In line with the U.S. rally, Europe’s FTSEurofirst 300 index (.FTEU3: ) tacked on 0.2 percent to close at 1,147.61, hitting a fresh 27-month high.

Global stocks measured by the MSCI all-country world index (.MIWD00000PUS: ) edged up 0.2 percent, just a few points short of a 26-month high hit last month.

Looking ahead, Japan’s stock market will be closed on Thursday for the Emperor’s Birthday, a holiday.

U.S. DEBT PRICES FALL

Traders shrugged off the latest data showing U.S. consumer spending was softer than previously estimated and third-quarter U.S. economic growth was also below forecasts but higher than earlier estimates.

“The more recent data suggests we’re seeing reasonably healthy retail sales growth, pretty healthy investment spending, and some growth in employment. So maybe the core growth or final sales growth is starting to accelerate in the fourth quarter,” said Zach Pandl, an economist at Nomura Securities International in New York.

U.S. Treasury prices slipped in thin trading after the Federal Reserve completed its last purchases until next week. With traders concerned about next week’s supply, the benchmark 10-year U.S. Treasury note dropped 11/32 in price, yielding 3.35 percent.

CLARITY SOUGHT IN EUROPE

The ratings warnings on smaller debt-laden euro-zone countries sent the single currency stumbling against the Swiss currency, but the euro eked out some gains against the generally flat dollar.

The euro nudged 0.01 percent higher to $1.3096 from a previous session close of $1.3095. The dollar dipped 0.10 percent against a basket of major currencies (.DXY: ) to 80.64. Against the Japanese yen, the dollar slipped 0.19 percent to 83.57 yen.

Some of the euro’s respite came from a Portuguese newspaper report that China was ready to buy 4 billion to 5 billion euros worth of Portuguese sovereign debt. [ID:nLDE6BL0MW] Beijing offered no comment on the report, leaving investors in the bond market unconvinced and sovereign bonds of smaller European countries under pressure.

“There’s been no clarity on what European Union leaders will do to deal with the debt crisis,” said Investec economist Philip Shaw. “That uncertainty, coupled with the threat of downgrades to various peripheral countries, has led to more spread widening and a weaker euro.”

The credit rating warnings and the weakening dollar supported the safe-haven demand for gold. The euro’s troubles and growing appetite for risk, however, muted gold’s earlier advance, as its spot price dipped 0.1 percent to $1,383.19 an ounce in late trading on thin year-end volume.

U.S. oil futures for February delivery rose 66 cents, to settle at $90.48 per barrel, the highest settlement since October 3, 2008. The rally was driven by unusually cold weather in parts of the northern hemisphere and a large decline in weekly crude stocks, surpassing expectations.

(Reporting and writing by Alina Selyukh; Additional reporting by Karen Brettell, Edward Krudy, Wanfeng Zhou, Gene Ramos, Ellen Freilich and Leah Schnurr; Editing by Jan Paschal)

World stocks rise on optimism