Global shares gain in broad global advance, U.S. debt prices fall

By Herbert Lash
Traders work on the floor of the New York Stock Exchange
Traders work on the floor of the New York Stock Exchange May 12, 2014. REUTERS/Brendan McDermid

By Herbert Lash

NEW YORK (Reuters) - Global equity markets surged on Monday, with the Dow industrials setting a record high as stocks advanced in a broad rally spurred by strong corporate results and an improving economic outlook.

Prices of U.S. Treasury debt fell, while European shares scaled six-year highs, underpinned by fresh takeover activity and renewed speculation about monetary stimulus from the European Central Bank.

On Wall Street, nine of the 10 primary S&P 500 sectors were in positive territory, with gaining stocks topping declining shares by 4 to 1 on the New York Stock Exchange and by almost 5 to 1 on the Nasdaq stock market.

MSCI's all-country world index rose 0.6 percent and the pan-European FTSEurofirst 300's index of leading shares climbed by a similar margin.

The Dow set an intra-day high and the S&P 500 was less than four-tenths of 1 percent away from a new record high.

The Dow Jones industrial average rose 97.68 points, or 0.59 percent, to 16,681.02. The S&P 500 gained 14.46 points, or 0.77 percent, to 1,892.94 and the Nasdaq Composite added 58.674 points, or 1.44 percent, to 4,130.543.

Weak economic numbers during the harsh winter and surprising strength in the bond market had kept money in fixed income, said David Kelly, chief global strategist for JPMorgan Funds in New York. An improving economic outlook has drawn investors back into stocks, he said. "I hate to make day-to-day rationalizations of the behavior of the market, but the key point is, falling unemployment and rising economic growth ultimately mean that both interest rates and stocks prices are likely to move higher," Kelly said.

Equity markets shrugged off rising tensions over Ukraine. Pro-Moscow rebel organizers of a weekend referendum in Ukraine said nearly 90 percent had voted in favor of self-rule, possibly opening the way for the region to break away from Kiev in a conflict spinning increasingly out of control.

U.S. Treasuries yields rose before a heavy week of data that includes retail sales and consumer price reports that will be watched for signs of economic strength and whether inflation is rising from levels below the Federal Reserve's targets.

Benchmark 10-year notes were last down 6/32 in price to push their yield up to 2.6467 percent.

The euro traded near break-even against the dollar and yen, unperturbed by the weekend referendum in Ukraine.

Against sterling, however, the euro fell to a 16-month low on growing bets the European Central Bank will ease monetary policy just as the Bank of England prepares to raise rates.

The euro's gains were trimmed after dovish comments from Austria's central banker, Ewald Nowotny. He told reporters it would take more than a cut in interest rates to combat low inflation in the euro zone.

The euro was down 0.02 percent against the greenback at $1.3754. The dollar rose 0.27 percent against the yen at 102.12.

Global oil prices rose on as investors braced for a possible escalation in Ukraine's civil conflict and the European Union expanded sanctions to Russian individuals and Crimean companies.

Though it is unlikely the turmoil would lead to a disruption in energy supplies from Russia, top global oil exporter Saudi Arabia volunteered to supply more crude in the event of a shortage. [ID:nL3N0NY0H6]

Brent crude was up 42 cents at $108.31 a barrel. U.S. crude gained 72 cents to $100.71 a barrel.

(Reporting by Herbert Lash; Additional reporting by Marc Jones in London; Editing by Dan Grebler)