Chinese, US data spark overnight sharemarket rebound

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Equities on Wall Street enjoyed a relief rally after data on Chinese industrial production and US retail sales exceeded expectations.

China's May industrial output jumped 13.3 per cent from a year earlier, which was better than expected. In the US, retail sales fell less than forecast in May and producer prices rose less than expected, both seen as positive signs for the world's largest economy.

In late afternoon trading, the Dow Jones Industrial Average climbed 1.30 per cent, the Standard & Poor's 500 Index advanced 1.49 per cent and the Nasdaq Composite Index rose 1.65 per cent.

Recent declines have made valuations more attractive. More than US$1 trillion was erased from US equity markets from the S&P 500's peak on April 29 through yesterday, leaving the measure trading at about 12.8 times its companies' estimated earnings for 2011, according to Bloomberg News. That's the cheapest valuation since August.

"It's like pressing down on a spring. You can only press it down so far before you get a bounce back," Jeffrey Saut, chief investment strategist for Raymond James Financial, in St. Petersburg, Florida, told Reuters.

"Since 1995, the S&P has gone down six straight weeks in a row only six times. After every one of them, there has been a very strong, throwback rally from a very oversold, compressed S&P 500," he said.

Among stocks favoured by investors today were Best Buy Co after profit surpassed analysts' forecasts and J.C. Penney Co after it named Ron Johnson, Apple's retail head, as its chief executive officer.

Optimism prevails among some investors including Birinyi Associates Inc's Jeffrey Yale Rubin who said at a panel discussion on equities at the Bloomberg Money Managers conference in Boston today that the firm was bullish on equities this year.

"For the remainder of the year, we're positive," Rubin said. For the S&P 500, "we have a target of 2,100 but that's not this year, that's not next year.

When we look at stock markets that go on for a long period of time, that start off quickly - 1974, 1982, 2009 - those markets are not ones that end quickly. If you also look at those markets during this period, phase two of the market, it runs into difficulty."

The positive tone today also benefitted the euro, which rose as high as US$1.4498 on electronic trading platform EBS. It was last at US$1.4479, 0.4 per cent stronger on the day.

Gains may be limited, however, as investors remain cautious because of Greece's debt crisis.

On Tuesday, euro zone finance ministers meet to discuss how private Greek bondholders should be involved in a second financing package for the country ahead of a June 20 deadline for a deal. No decisions are expected on Tuesday.

The greenback was 0.13 per cent weaker against a basket of major currencies. Against the yen, the US currency advanced 0.4 per cent to 80.51.

Oil rose, with Brent crude for July rising US$1.60 to US$120.70 a barrel, while US futures gained 89 cents to US$98.18.

Metals also advanced. Spot gold gained 0.5 per cent to US$1,521.97 an ounce by 1.22pm EDT, while the US August contract was US$7.60 stronger at US$1,523.20 an ounce.

Spot silver rebounded from Monday's 4 per cent drop, up 2.2 per cent to US$35.44 an ounce.

In other news, Bank of America, the largest US lender, "significantly hindered" a federal review of its foreclosures on loans insured by the Federal Housing Administration, the US said.

The bank was slow in providing data and offered incomplete information, according to the US Department of Housing and Urban Development inspector general's office, which conducted the review.

"Our review was significantly hindered by Bank of America's reluctance to allow us to interview employees or provide data and information in a timely manner," William Nixon, an assistant regional inspector general for the agency, said in a sworn declaration. The filing was dated June 1 and obtained yesterday by Bloomberg News.

Separately, JPMorgan & Co ousted mortgage chief David Lowman after the US second-largest bank overcharged active-duty military personnel on loans and improperly foreclosed on other borrowers.

"Dave Lowman and I have decided he will leave the firm," Frank Bisignano, the head of home-lending, said today in an internal employee memo obtained by Bloomberg News.

Meanwhile, former Utah Governor Jon Huntsman said at a Thomson Reuters event that he will announce his bid for the Republican presidential nomination on June 21, formally kicking off his campaign for the White House.