NEW YORK: Global stock markets rose to record highs on Monday, underpinned by improving U.S. economic data that overshadowed a credit squeeze in China, while subdued inflation undermined gold and left it on course for its worst year in over two decades.
Thin pre-holiday trading, with many investors gearing up for Christmas and Tokyo on holiday, meant exaggerated price movements.
Wall Street share indexes bolted higher after data showed U.S. consumer spending rose to a five-month high in November, while consumer sentiment improved in December. At the same time, signs of strength in the world’s largest economy have not spurred inflation, with a price index of consumer spending unchanged for a second straight month.
The Dow Jones industrial average closed at a record high, up 73.47 points, or 0.45 percent, at 16,294.61. The Standard & Poor’s 500 Index also ended at a record, up 9.67 points, or 0.53 percent, at 1,827.99. The Nasdaq Composite Index surged 44.16 points, or 1.08 percent, to 4,148.90.
Apple Inc shares rose 3.83 percent to close at $570.09 after the company signed a long-awaited distribution deal with China Mobile.
“Just off the deal alone with China Mobile, that can equate to a 10 percent upside on Apple’s stock,” said Todd Schoenberger, managing partner at LandColt Capital in New York.
European stocks rose for a fourth consecutive session, buoyed by corporate takeover action. Europe’s FTSEurofirst 300 index closed up 0.7 percent at 1,296.83.
Germany’s DAX index rose 0.9 percent to a record closing high of 9,488.82. German broadcaster ProSiebenSat1 rose 1.6 percent as it agreed to sell its eastern European TV and radio stations.
Sentiment globally was underpinned by upbeat U.S. data and the resilience of stocks to the Federal Reserve’s decision last week to start scaling back its bond-buying stimulus.
The benchmark 10-year U.S. Treasury note closed down 11/32 in price, the yield rising to 2.933 percent.
“Growth is picking up,” International Monetary Fund head Christine Lagarde said on NBC. “And unemployment is going down. So all of that gives us a much stronger outlook for 2014, which brings us to raising our (U.S.) forecast.”
It was not all festive cheer, however. China’s benchmark short-term money rates reached a near six-month high of 10.0 percent at one stage as its credit squeeze continued.
Rapid credit growth in the world’s second-biggest economy has worried Chinese authorities, who fear rising debt levels are fueling asset bubbles.
The People’s Bank of China injected more than 300 billion yuan ($49.4 billion) into the interbank market on Friday in response to rising rates, but hinted that banks had work to do if they wanted to avoid a cash crunch.
THAI TURMOIL, ITALY CHIDED, GOLD SLUMPS
The Thai baht fell to a near four-year low of 32.77 per U.S. dollar. Thailand’s political turmoil grew as anti-government protesters gathered on Sunday to demand Prime Minister Yingluck Shinawatra resign.
In the euro zone, the European Central Bank warned Italy that it needed to keep its public finances in check . Italian benchmark 10-year government bond prices fell, sending yields up to 4.182 percent.
The dollar traded flat at 104.07 yen after hitting a five-year high at 104.63 last week.
The euro rose 0.19 percent to $1.3697, off the day’s high of $1.3716.
Spot gold slumped $5.03 to $1,198.38 an ounce after hitting a six-month low of $1,187.80 last week. If prices stay at that level, the metal would have shed 28 percent this year, the largest annual loss in 32 years.
“The Fed QE tightening… will lead to a gradual rise in interest rates, which will eventually make the cost of carrying gold a lot higher… and that suggests further liquidation,” said Bernard Sin at MKS SA.
Oil prices slipped as investors focused on refinery strikes in France and internal strife in South Sudan. U.S. oil futures dipped 64 cents, or 0.64 percent, to $98.68. Brent crude dropped 0.28 percent to $111.49 a barrel after gains of almost 3 percent last week.