LONDON, Sept 3 - Shares in Europe, the U.S. and Japan surged past recent highs on Wednesday as signs of economic recovery become more firmly established in investors' minds, while bond prices continued to come under pressure. Data from the euro zone index for the services industry showed the fastest rate of expansion since mid-2002 and was ahead of consensus forecasts. This, combined with positive U.S. data, boosted equity markets. "It is a pleasant surprise certainly," said Nomura analyst Adolf Rosenstock. "Seeing that manufacturing and services globally are now beginning to expand in parallel, the outlook for the global economy at large is brightening up very much."
The services data showed activity in the sector rose further above the 50 level that divides shrinkage from growth to reach 52.0 in August, ahead of a consensus forecast of 51.0. European stocks pushed to their highest levels of 2003, led by technology shares, with Nokia leading the charge. In the consumer sector, cosmetics giant L'Oreal added gloss to the advance after first half earnings. By 0843 GMT, the FTSE Eurotop 300 index <.FTEU3> was up 1.26 percent, 11.52 points at 923.48 and the DJ Euro Stoxx 50 index <.STOXX50E> put on 1.25 percent, or 2.78 points to 221.44. Euro zone bond prices shed brief morning gains after the srevices data. The September Bund future was up six ticks on the day at 112.65, having briefly dipped to 112.59. "We saw a slightly downward repricing of bonds, nothing dramatic," said a trader in London.
U.S. Treasuries were also under pressure following a drubbing on Tuesday after U.S. data from the Institute of Supply Management showed stronger than expected manufacturing growth. The 10-year T-Note yielded 4.5852 percent, while two-year T-Notes yielded 2.0482 percent. A chunk of U.S. data will be released on Wednesday and later in the week which investors will watch closely for further confirmation of economic recovery. Today sees the Fed's beige book, which summarises the U.S. economy in 12 states, and U.S. July construction spending data. Friday will see U.S. payroll data.
YEN ADVANCES VERSUS EURO, WARY ON DOLLAR
The euro hit eight-month lows against the yen and 4-1/2 month lows against the dollar on Wednesday as optimism about the global economy encouraged buyers of Tokyo and U.S. stocks and sellers of euro zone bonds. The dollar held above the previous day's 3-1/2 month lows against the yen, due to market concern about intervention by Japanese authorities to sell yen for dollars. "The better global economic outlook is making people believe that Japan is having a cyclical rebound and the yen is going to remain under strengthening pressure," said Hans Redeker, chief currency strategist at BNP Paribas.
"People are buying Japanese assets, and although we might see some intervention, it will not be of the size we have seen before." By 0750 GMT the euro dropped as far as 125.05 yen , its lowest level since January and more than half a percent down from the U.S. close. The euro weakened to $1.0767 , its lowest level since April, and 10 percent down from record highs set in June. The dollar was trading at 116.13 yen , compared with 3-1/2 month lows below 116 set on Tuesday.
OIL EDGES HIGHER AFTER SELLOFF
IPE Brent futures edged higher on Wednesday, rebounding from dramatic falls on Tuesday triggered by the end of long positions on U.S. gasoline at the finish of the U.S. summer driving season. October Brent on the International Petroleum Exchange was up 30 cents at $27.82 a barrel after plunging six percent on Tuesday to its lowest close in six weeks. Gold was lower after a sharp price fall of $8 an ounce on Tuesday from seven-month highs and was trading at 371.80/2.50 an ounce in London.//