World shares up as investors find value

Stocks on both sides of the Atlantic advanced as investors found value after the recent slump and fresh assurances from central bankers in both China and the US.

US economic data provided evidence of further strength, as reports on durable goods orders, sales of new homes, home prices and consumer confidence all beat analysts' expectations. Also helping was a promise from China's central bank that it will keep money-market rates at a "reasonable" level.

In late afternoon trading in New York, the Dow Jones Industrial Average gained 0.73 per cent, the Standard & Poor's 500 Index rose 1 per cent and the Nasdaq Composite Index advanced 0.68 per cent.

In Europe, the benchmark Stoxx 600 Index climbed 1 per cent from the previous close. The UK's FTSE 100 increased 1.2 per cent, France's CAC 40 rose 1.5 per cent and Germany's DAX closed with a 1.6 per cent gain.

"There's a lot of great buying opportunities that were created in the last few days and I think investors will step in and take advantage of that," Keith Bliss, senior vice-president at Cuttone & Co in New York, told Reuters.

The S&P 500 closed at the lowest level in nine weeks on Monday amid concern about the Federal Reserve's plans to start tapering its stimulus program if the US economy strengthens in line with the central bank's forecasts.

There was plenty of evidence of a sustainable recovery today. The Conference Board's index of consumer confidence rose to 81.4 in June from 74.3 in May. Durable goods orders gained 3.6 per cent last month, while sales of new homes increased more than forecast in May, climbing to the highest level in almost five years, and home prices rose more than forecast in the 12 months through April.

"The economy is leaning forward and the data underscore that it is time for the Fed to begin to move away from expanding its balance sheet," Steve Blitz, chief economist at ITG Investment Research in New York, told Reuters.

That's good news for the US dollar. The greenback rebounded from an earlier drop of 0.2 per cent, strengthening 0.2 per cent to US$1.3089 per euro.

US Treasuries fell, pushing yields on the 10-year bond up six basis points to 2.59 per cent. Still, the US sold US$35 billion of two-year debt at a better-than-expected yield of 0.430 per cent.

"The market is moving to higher yields, and the short end is following along," Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York, which as a primary dealer is obligated to bid at US government debt auctions, told Bloomberg News.

The US will auction US$35 billion of five-year notes on Wednesday, followed by US$29 billion of seven-year bonds on Thursday.