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U.S. stocks negate its growth setback

U.S. Stocks rose as recent housing and other economic indicators showed that the economy is rebounding from a bumpy winter that seriously disrupted trade.

Some investors have raised their forecasts for a U.S. economic spring back in coming months based on the first-quarter earnings.

The Sunni Islam insurgency in Iraq is threatening to raise costs for business around the world with oil prices already as high as $115 a barrel. The oil prices eased a bit on Thursday LCOcl but still remained close to levels it has never reached since the beginning of last year.

The global economy is still trying to get back on its knees and the rise is oil prices is a great setback. The June 25 final estimate of United States GDP in the first quarter of the year was the only argument that Federal Reserve will keep very low interest rates into 2014.

Quite a number of investment houses in the U.S. are also very positive about the future. Some even raised their estimates of second quarter growth following U.S. figures.

“There’s a storm in the rear-view mirror, but much brighter sunshine ahead,” said Kit Juckes, a London strategist with Societe Generale. “The storm does matter, though. There is every reason to be optimistic about upcoming U.S. data, and equally, every reason to expect policy to remain easy.”

European stock markets reacted to the U.S. on Wednesday figures by retreating, and then it later rebounded; but shares in Barclays dropped by 3 percent following New York’s attorney general’s lawsuit against the UK leader.

The dollar suffered and longer-term bond yields dropped and as funds moved out of the yield curve. Investors were only willing to accept 1.26 percent to lend to Germany for a ten-year period.
U.S. crude added 4 cents to $106.54 a barrel, while Brent remained unchanged at $114.00.

In Europe, top of the bill was the British pound and the effect on it of a Bank of England report on financial stability.

The report is expected to provide the bank’s Financial Policy Committee with a green light to announce more measures to reduce a booming British housing market, which some worry is overheating again, six years after the 2008 crash. Such measures might push back expectations of a rise in interest rates that have driven sterling 10 percent higher in a year.

“There’s quite a lot of uncertainty because this is all quite new for UK assets,” said Paul Robson, a London currency strategist with RBS.

“The devil will be in the detail, but the rule of thumb is that the tighter macroprudential policy becomes, the looser conventional monetary policy can be – i.e., interest rates might not have to be raised quite as early or aggressively as they would have otherwise been” he added.

Equity investors were encouraged by the prospect of Fed keeping rates low for longer, though some were cautious in the price index for personal consumption expenditures due Thursday surprised on the high side. This index looks likely to have reached its highest since late 2012 in May.

In Asia, markets looked positive with MSCI’s broadest index of Asia-Pacific shares outside Japan going up by 1.08 percent; Nikkei gained 0.3 percent and Australia 1.15 percent.

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