（September25, 2010）

US stock markets reached their highest level in four months overnight as mixed economic data offered traders a glimmer of hope that the US economy is strengthening. 
 

Yesterday's rally, in which the Dow Jones index rose nearly 2 per cent, closed the fourth straight week of gains as positive sentiment over the economy rises while fears of a double-dip recession subside.

A strong early rally held out throughout the day after figures released before the opening bell showed orders for big-ticket items decreased in August at a slower than expected rate.

Yet traders found comfort in the fact that excluding transportation equipment, mainly aircraft parts, orders of items such as household appliances rose by a more-than-expected 2 per cent last month.

The manufacturing industry is seen as one of the main engines pulling the US economy out of one of its worst recessions in decades.

The report "showed solid upward revisions to the previous month's figures and after stripping out the volatile components, demand for goods intended to last more than three years was strong in August", said analysts at Charles Schwab.

Stocks were little affected by less positive news that US home sales were flat in August, near historic lows.

"People are coming around to the acceptance that double dip scenarios of the global economy is not as assured as it might have been, but at the same time we are not growing all that robustly. The data has been mixed but not all that bad, so people are a little bit more confident," said Dan Greenhaus, chief economist strategist at Miller Tabak.

The Dow Jones Industrial Average jumped 197.84 points (1.86 per cent) to 10,860.26 in closing trades, while the broader S&P 500 index was up 23.84 points (2.12 per cent) to 1,148.67 points.

The tech-rich Nasdaq composite index rose 54.14 points (2.33 per cent) to 2381.22 on the back of a strong 6.88 per cent rise in shares of microchip maker Advanced Micro Devices (AMD).

A survey measuring German business confidence showed an unexpected rise to levels last seen in mid-2007, suggesting an expected slowdown will not mean a return to recession in Europe's leading economy.

The bond market declined as traders felt confident in the stock market.

The yield on the 10-year US Treasury bond was up to 2.612 per cent from 2.555 per cent on Thursday, while that on the 30-year bond rose to 3.793 per cent from 3.733 per cent. Bond yield and prices move in opposite directions.

In currency markets, the US dollar continued its decline against the euro as the greenback remains under pressure since the Federal Reserve said it might inject money into the economy.

The US currency also weakened against the yen and neared a historic low against the Swiss franc.

The euro also gained momentum after a report showed a rise in business confidence in Germany.

"On one hand the United States is another step closer to more quantitative easing with continued low interest rates, on the other hand Japan is obviously very concerned about the strength of its currency and wants it to be lower. Of the three major world currencies, what do you wanna buy?" said David Solin of Foreign Exchange Analytics.

The euro rose to 1.3488 at 2100 GMT (0700 AEST), up from 1.3312 on Thursday evening.

Against the yen, the dollar was down to 84.20 from 84.39 yen the day before.

The euro "extended the overnight rally (against the dollar) following the mixed slew of data, and the overall improvement in demands seems to be feeding into the rise in risk appetite as the exchange rate rallies to a fresh daily high," said analysts at DailyFX.com

Against other major currencies the dollar on Friday fell to 0.9846 Swiss francs from 0.9852 the day before, while the British pound rose to 1.5822 from 1.5680.

(Source:the Australian)