US data gives world markets hope

Stock markets

across the globe moved up on Wednesday, in most cases to their highest levels in 2009, a sure sign that people are willing to bet real money on the green shoots of economic recovery yielding a favourable harvest.

The optimism was understandable, given that US Federal Reserve Chairman Ben Bernanke on Tuesday said the US recession seemed likely to have ended. A 3.7% rise in retail sales in August -- the highest in three-and-a-half years -- backed his prognosis. So did news that US industrial activity in August was at 0.8%, better than the expected 0.6%, and consumer prices rose a stronger-than forecast 0.4%.

Given that the US is by far the world's biggest economy and the one that triggered the year-old global economic crisis, it is not surprising that good news from there is being treated as light at the end of the tunnel.

The rise in stock indices spread across Asia and Europe and the trend was sustained in early trading in the US. In Europe, Germany's DAX rose 1.3%, Britain's FTSE 1.6%, and France's CAC-40 1.6%. Major Asian markets like Korea, Hong Kong and Australia were all up by 2% or more and India was no exception with the sensex gaining 223 points.

Japan's Nikkei recorded a more modest 0.5% rise. China was the only significant exception, as it often is to market trends, with the Shanghai benchmark index falling 1.1% on profit-booking.

US retail sales figures jumped in August by the biggest amount in three and-a-half years, while a key measure of New York manufacturing touched its highest level since 2007. The massive stimulus packages appear to have had the desired effect.

Adding to the positive sentiment was the fact that Warren Buffett, the iconic American investor, has said he was buying US stocks again. If anything, the gains in the markets seem to be more muted than such a heavy dose of good news would warrant, thanks largely to the worry that unemployment will not go down in a hurry.

In Britain, the unemployment rate rose to near a 13-year high, while the Organization for Economic Cooperation and Development forecast that joblessness in the 30 leading industrial nations would hit a new post-War high of 10% next year.

Global oil prices too rose to above $71 a barrel, another indicator that markets are taking the pointers towards worldwide economic recovery very seriously.

Wednesday's rise in stock markets, however, caused the dollar to lose ground against other major currencies, with the greenback hitting its lowest exchange rate against the euro this year and sinking further against the yen. That, analysts believe, is because the dollar is treated as a safe haven in times of crisis and those who had used it as such are now exiting to more lucrative options.