Shares, dollar gain after GDP data eases Fed fears

Wed Jun 26, 2013 4:50pm EDT
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By Herbert Lash

NEW YORK (Reuters) - The dollar rose and global equity markets gained for a second day on Wednesday after a surprisingly sharp downward revision to first-quarter U.S. economic growth eased concerns the Federal Reserve might soon begin to withdraw stimulus.

In addition, moves by China to calm bank fears and supportive signs from the European Central Bank on the need for continued stimulus helped extend Tuesday's rebound after the global sell-off of stocks, commodities and bonds last week.

U.S. gross domestic product grew at only a 1.8 percent annual rate in the first quarter, the Commerce Department said in its final estimate, down from the prior estimate of a 2.4 percent pace.

The benchmark S&P 500 stock index was on track for its biggest two-day gain in three weeks, cutting the decline since its all-time closing high a month ago to 3.95 percent.

"Despite all the rhetoric and fear about tapering, this will keep the Fed firmly planted in stimulus, which is a positive for the market," said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston, which oversees about $9.5 billion.

"This is another example of bad news being good news."

European stocks gained close to 2 percent to post their biggest two-day gain since April after ECB president Mario Draghi said an accommodative monetary policy was still appropriate. The bank's policy "will stay accommodative for the foreseeable future," he said.

MSCI's all-country world equity index .MIWD00000PUS rose 0.96 percent, while the pan-European FTSEurofirst 300 index .FTEU3 of leading regional companies gained 1.71 percent to close at 1,149.71 points. The EuroSTOXX 50 index .STOXX50E rose 2.34 percent.   Continued...

Traders work on the floor at the New York Stock Exchange, June 24, 2013. REUTERS/Brendan McDermid