By Herbert Lash
NEW YORK (Reuters) – Stocks on Wall Street rebounded on Friday on renewed signs of solid growth and as U.S. consumer sentiment hit a high last seen in 2004, while the euro slid further against the dollar in the wake of Switzerland’s move to ditch its currency cap.
Crude prices rallied more than 3 percent after the West’s energy watchdog forecast the sell-off in oil would end, though analysts said a strong rebound was unlikely to occur soon as global output continued to outweigh demand.
The oil rout led U.S. consumer prices to post their biggest decline in six years in December and an underlying gauge of inflation failed to rise, developments that could make the Federal Reserve more cautious about raising interest rates.
U.S. stocks advanced after five straight sessions of losses for major indexes, while European shares rose on the notion that Switzerland’s move on Thursday to drop the franc’s cap was in anticipation of a likely European Central Bank bond-buying plan.
Dealers speculated the Swiss National Bank knew the ECB would take the plunge into full-scale quantitative easing, effectively printing of hundreds of billions of euros, at its policy meeting on Jan. 22.
“It challenges the view that ECB easing is already in the price,” said Daragh Maher, a currency strategist at HSBC in London. “There is recognition now that maybe there wasn’t as much in the price as some claimed.”
The loss of Swiss support for the euro caused the single currency to slide to $ 1.1461 (EUR=), a trough not seen since November 2003. It last traded at $ 1.1498, down 1.12 percent.
Global equity markets rebounded, with MSCI’s all-country world index gaining 0.17 percent. The pan-European FTSEurofirst 300 index (.FTEU3) of leading regional companies rose 0.99 percent to 1,407.18 points,
Stocks in Switzerland again sank on concerns the SNB’s surprise currency move will spark a wave of profit warnings from Swiss multinationals that rely heavily on export revenue.
Morgan Stanley estimated that 85 percent of Swiss company sales come from abroad and many of the large-cap names generate up to 95 percent of their revenue from outside the country.
The Swiss blue-chip index SMI (.SSMI) was down 6 percent.
The Dow Jones industrial average (.DJI) rose 44.86 points, or 0.26 percent, to 17,365.57. The S&P 500 (.SPX) added 9.55 points, or 0.48 percent, to 2,002.22 and the Nasdaq Composite (.IXIC) gained 23.39 points, or 0.51 percent, to 4,594.21.
U.S. Treasuries prices fell to session lows after a private report on American consumer sentiment in early January reduced worries about domestic growth, sparking the selling of safe-haven holdings in U.S. government debt.
The price of 10-year U.S. Treasuries fell 7/32, pushing the price of the benchmark security up to yield 1.7984 percent.
The International Energy Agency said the market for crude oil could fall further before it recovered, but there were already signs lower prices had begun to curb production in some areas, including North America.
Brent crude futures for March delivery (LCOc1) jumped to a high of $ 50.25, before easing a bit to trade 87 cents higher at $ 49.14 a barrel. U.S. crude (CLc1) traded at $ 47.36 a barrel, up $ 1.11 a barrel.
(Reporting by Herbert Lash; Editing by Alan Crosby)
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