US Stocks Gain on Central Bank Stimulus Wagers

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US Stocks Gain on Central Bank Stimulus Wagers

US stocks opened higher extending the global equity rally in Europe and Asia, amid speculation that the European Central Bank would purchase government debt to support growth.

The Bank of China was ready to ease the monetary policy to head the slowing inflation.

Merger activity, with deals in automotive parts in Korea, packaging sector in Switzerland, mobile phones in Nigeria, biopharmaceuticals in Netherlands and insurance in the US added to the risk-taking sentiment.

Reuters reported that the Standard & Poor 500 Index climbed 0.29% to 2,063.50, on track to a record high. The Dow Jones Industrial Average climbed 0.19% to 17,843.49.

The Russell 2000 index of small companies gained 0.8%. The Stoxx Europe 600 was little changed with gains by banks offsetting slumps in resource producers.

The 1.2% advance last week by the S&P 500 came as data indicated that the US economy is on track to improvement, China unexpectedly lowered its interest rates and the ECB President Mario Draghi pledging to raise inflation the fastest possible.

As quoted by Bloomberg Businessweek, Robert Pavlik, chief market strategist at Banyan Partners LLC “We’re seeing a carryover from last week’s comments made by Draghi trying to address the inflation in Europe, and the actions from the Chinese Central bank to lower lending rates. You’ve gotten some good economic news and earnings reports. The market has more upside potential.”

The MSCI Emerging Markets Index climbed fifth day, jumping 0.7%. The Hang Seng China Enterprises Index climbed 3.8% while the Shanghai Composite Index rose 1.9%.

European markets were less bullish with the German GDAXI and French FCHI indexed climbing 0.7% to 0.8%. UK stocks dropped less than 0.2%.

Head of private client research at London-based investment manager Charles Stanley, Jeremy Batstone-Carr said, “The markets are continuing to react to the Chinese rate cut on Friday and to Draghi’s comments.”

To contact the reporter of the story: Jonathan Millet at john@forexminute.com