Shares have opened higher at the start of the week as investors looked to take advantage of the recent drop in prices to add to their portfolios.
Helping the sentiment was at least the semblance of support from the Group of Eight world leaders to bolster growth in the euro zone, though no concrete plan or plans were detailed.
On Wall Street, the three big US benchmarks were sharply higher in afternoon trading, paced by a rebound in some of the larger cap companies including Apple and Boeing. A decision by Eaton to buy Cooper Industries for US$11.8 billion also helped.
In late afternoon trading in New York, the Dow Jones Industrial Average rose 0.75 percent, the Standard & Poor's 500 Index gained 1.22 percent and the Nasdaq Composite Index climbed 1.97 percent.
"We sold off on some fear, and not all of that fear was realised," Frank Lesh, a futures analyst and broker at FuturePath Trading, told Reuters. "We're in a bit of an oversold bounce in here at the moment."
The bounce began in Europe where the political brinkmanship in Greece last week faded. Europe's Stoxx 600 Index ended the session with a 0.5 percent increase for the day. The FTSE 100, the DAX and the CAC 40 all advanced. European Union officials are set to meet on May 23.
"It’s pretty clear the EU is starting to shift its focus over to growth and that is going to come through,” Kathy Lien, director of currency research with online currency trader GFT Forex, in New York, told Bloomberg News.
The euro was up 0.02 percent at US$1.2784, well above Friday's four-month low of US$1.2642, which was not far from its lowest point for 2012.
It wasn't as good a day for the yen with the Bank of Japan widely expected to intervene yet again in the markets to cool the currency's rise.
BOJ officials will gather for a two-day meeting starting tomorrow, Bloomberg reported. The central bank expanded its asset-purchase program in February and April. Last week, two bond-buying operations failed to attract the central bank’s target for sell offers.
In contrast to the overall positive mood, shares in Facebook were hammered on the second day of trading. The stock fell well below the initial offering price, and was down about 10 percent with an hour left in Monday's session. The drop has knocked Mark Zuckerberg's fortune down by about US$2 billion.
The appeal of the relative safety of US Treasuries remains strong, which should translate in solid demand for this week's auctions. The US is set to sell US$35 billion of two-year notes tomorrow, followed by another US$35 billion of five-year debt on May 23 and US$29 billion of seven-year securities on May 24.
“There continues to be demand for the long end,” Ian Lyngen, a government bond strategist at CRT Capital Group in Stamford, Connecticut, told Bloomberg. “The market has been able to improve on the day. The persistent flight to quality demand will support this week’s auctions.”
China can now bypass Wall Street when buying US government debt and go straight to the US Treasury, in what is the Treasury's first-ever direct relationship with a foreign government, according to documents viewed by Reuters.
(BusinessDesk)
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