August 22, 2013 / 2:34 AM / in 4 years

Dollar, shares gain as PMIs point to world growth

NEW YORK (Reuters) - The dollar rose and global equity markets gained on Thursday after business surveys from around the world revealed a global economy in expansion, helping cement expectations the Federal Reserve will trim its bond-buying program in September.

Traders work on the floor of the New York Stock Exchange August 21, 2013. REUTERS/Brendan McDermid

Purchasing managers surveys showed better-than-expected growth in the euro zone, a rebound in China’s vast manufacturing sector and U.S. manufacturing activity rising to a five-month high in August.

Data from the Labor Department showing the number of Americans filing new claims for jobless benefits held near a six-year low last week added to signs the U.S. economy is starting to find firmer footing.

The dollar trimmed gains after initial claims for state unemployment benefits climbed 13,000 to 336,000, just above the level expected by economists in a Reuters poll.

But the four-week moving average for claims, a better gauge of labor market trends, fell to its lowest level since November 2007, suggesting the U.S. economy was growing enough to fuel steady improvement in the jobs market.

The report did not change the market’s view that the Fed will begin to trim, or taper, its monetary stimulus next month.

“The Fed tapering theme continues. Yesterday’s Fed minutes reinforced expectations that the Fed will taper its quantitative easing program in September and today’s jobless claims didn’t really change that,” said Greg Moore, currency strategist at TD Securities in Toronto.

“The jobless claims rose but they were not really that far off from the consensus forecast.”

The dollar hit a more than two-week high against the yen at 98.80 yen, breaking past the August 15 peak of 98.66 yen, which had acted as initial resistance. It was last at 98.54 yen, up 0.9 percent.

The euro weakened 0.1 percent against the dollar to $1.3340.

Global equity markets rose, with major European indices up more than 1 percent.

MSCI’s all-country world index .MIWD00000PUS rose 0.39 percent, while the FTSEurofirst 300 .FTEU3 index of top European shares rose 1.13 percent.

The Dow Jones industrial average .DJI was up 45.04 points, or 0.30 percent, at 14,942.59. The Standard & Poor’s 500 Index .SPX was up 11.18 points, or 0.68 percent, at 1,653.98. The Nasdaq Composite Index .IXIC was up 31.92 points, or 0.89 percent, at 3,631.71.

European shares snapped a three-session losing streak after manufacturing survey data for August suggested that growth was taking root in the euro zone.

Markit’s Flash Composite Purchasing Managers’ Index showed business activity across the euro zone picked up at a faster pace than expected, bouncing to 51.7 from last month’s 50.5.

“If you want to understand whether there’s a positive or a negative outlook for equities, then PMIs are quite a good measure. We’ve seen a gradual improvement in PMIs since last July, and now we’re in growth territory,” said James Butterfill, global equity strategist at Coutts.

U.S. government debt prices rose, pushing yields lower from recent two-year highs.

The benchmark 10-year U.S. Treasury note was up 3/32 in price to yield 2.8807 percent.

Brent crude steadied around $110 a barrel as the upbeat data from China and the euro zone kindled hopes for better demand from two of the world’s largest energy consumers, and as oil exports from Libya stayed limited by strikes and unrest.

October Brent crude traded flat at $109.92 a barrel. U.S. crude gained 62 cents at $104.47.

Additional reporting by Richard Hubbard; Editing by Dan Grebler

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