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Dow Jones soars to record high; US up 9% this year

A series of good economic data and expectations of more central bank stimulus see the US Dow Jones Industrial Average surge past its 2007 pre-crisis peak for the first time.

 
Dow Jones soars to record high; US up 9% this year

16.50: The New Year stock market rally reached a significant milestone this afternoon as the US Dow Jones Industrial Average surpassed its 2007 pre-crisis peak for the first time.

Responding to a better-than-expected report from the US service sector and to good economic news from China and Europe earlier in the day (see below) the Dow Jones index raced 146 points or just over 1% higher to 14,275.

Soon after the opening bell it tore past 14,1980, the intraday all-time high it reached in October 2007. It has surged nearly 9% this year in common with all stock markets as investors have begun to believe that the crisis is over, or if not, that central banks will continue to print and pump new money into the financial system.

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Meanwhile the S&P 500 – the US' other main market index – gained 15 points or 1% to 1,540 after the Institute for Supply Management (SAM) said its services index rose to 56 last month, its highest in a year and and beating economists' forecasts of 55. It rose from 55.2 in January. (In these surveys readings above 50 show growth, below 50 indicate contraction.)

The FTSE 100 joined the chase extending its rise to 86 points or 1.4% higher at 6,431. Its fastest rising stock Serco (SRP.L), the outsourcer, closed the day 9.2% or 53p up at 632.3p, after thrilling investors with a 20% rise in the dividend.

The FTSE 100 has also marched 9% higher this year but is still 300 points off its peak of 6,732 reached on 15 June 2007.

In Europe the FTSE Eurofirst 300 index surged 1.77% or 20 points to 1,189 with the German Dax index leaping 2.4% or 187 points to 7,879 and the French Cac 40 jumpoing 2% or 77 points up at 3,786.

Gold, a traditional safe haven, ignored investor bullishness and a slightly firmer dollar to edge up 0.1% to $1,575 an ounce.

Investors cheer dividend hikes as FTSE rallies

12.48: European stock markets enjoyed all the ingredients for a rally on Tuesday: overnight gains on Wall Street; dividend hikes, forecast-beating economic data and signals of more stimulus.

The result was a 1.25% rise on the Eurofirst 300 and 0.8% jump on London’s FTSE 100, to 6,397.

The bright corporate news came from companies including Serco (SRP.L), the outsourcing firm that announced it was hiking its dividend by 20%, while reporting 6% growth in pre-tax profits. Shares rose 7% to 621p.

Standard Chartered (STAN.L) also gave yield-hunting investors reason to cheer, reporting its tenth consecutive annual profit rise and a 10.5% full year dividend hike. Shares in the emerging markets focused bank rose by 2.7% to 1,829p.

Xstrata (XTA.L), a member of Citywire Top Stocks, and Glencore (GLEN.L) were also among the biggest risers, up 4% to £11.44 and 3.2% to 381p respectively after updating markets on their planned merger.

Decent economic data came in the form of better-than-expected PMI (purchasing managers index) readings for the UK and Europe. The euro rose slightly against the US dollar to trade at $1.1034 after the report showing February manufacturing and services activity in the euro bloc contracted less than economists had feared. The eurozone PMI still indicates contraction though, at 47.9.

The pound traded higher against both the euro (€1.1622) and US dollar ($1.5150) after a report showed UK services expanded in February at a faster pace than expected.

Comments from Janet Yellen, vice chair of the Federal Reserve, supporting the ‘highly accommodative monetary policy’ of the US central bank, also helped bolster sentiment.

In China there was a reminder that the world's second largest economy is still massively outpacing the developed world, with outgoing premier Wen Jiabao reiterating the country's 7.5% growth target for 2013. Though he reportedly added that China would have to 'work hard to attain' such growth.

Commodities rose, with Brent crude oil futures climbing 0.5% to $110.69 per barrel.

Investors now look to the US ISM non-manufacturing index for February, due this afternoon. Beyond that, the European Central Bank and Bank of England are due to announce the results of their latest policy meetings on Thursday, while the closely-watched US jobs report will feature among the data highlights on Friday.

For the day's other risers and fallers see our FTSE data pages

5 comments so far. Why not have your say?

Bevan

Mar 05, 2013 at 13:23

Those fund managers who invested or topped up following the Iran money laundering scandal at Standard C have really done well. Just highlights how buying on the dips can pay off! www.fundgurus.co.uk

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Geoff James2

Mar 05, 2013 at 14:53

Hi Bevan

But it would have been a very brave person to buy-in on the low. All the signals in the media were present for the bank to expect a fine in excess of 1$bn - may be much higher.

I think the markeet costed in a really big fine. The company then got off very lightly, and so the market priced that in too. Hence the dip/recovery.

I know I would never have pumped money in - it would have been a pure punt at that time.

Regards

Geoff

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Anonymous 1 needed this 'off the record'

Mar 05, 2013 at 14:56

Are you not mixing up standard life and standard chartered share prices? results?

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Alan Anderson

Mar 05, 2013 at 16:09

It wasn't only the fund managers who did well out of Stan Chart's plunge. Was that a plug for Funds by any chance?

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Roger11

Mar 05, 2013 at 17:09

Bevan has a point, people generally over react to fines and regulation clamp downs. Look at Barclays, they certainly recovered and some since dropping dramatically last year.

P.S some interesting views at www.fundgurus.co.uk !

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