Obama infrastructure plan sends world sharemarkets surging
(11am update) World stockmarkets surged overnight as US President-elect Barack Obama pledged to boost the economy with the biggest public-works spending package since the 1950s when President Eisenhower created the interstate highway system..
The benchmark indices on Wall Street closed above a 3.5% gain while, earlier, the German and French markets were up 8% while Asian markets were stronger.
Steel, aluminium and copper stocks led the Wall Street surge, all putting on double-figure gains as commodity prices rebounded from last week’s losses on speculation Obama’s spending on roads, bridges and school repairs will boost demand.
The plan is also expected to include spending on electrical grids, public transport, dams and investment in alternative fuels. In a televised interview, Mr Obama refused to put a cost on the plan, but senior Democrats are talking about $US700 billion, with others urging up to $US1 trillion. The plan could create some 2.5 million jobs.
The Standard & Poor’s 500 was 3.8% up 909.7, having put on more than 20% since its 11-year low on November 20. The main Dow Jones index closed 298.76 points higher, or 3.5%, at 8934.18 after rising above the 9000 mark.
General Motors jumped more than 14% as lawmakers agreed in principle with the White House to provide funds to shore up the car industry.
European shares rallied sharply, with oil majors and banks among the strongest performers. The pan-Europe Dow Jones Stoxx 600 Index gained 6.7% to 202.61, the most in two weeks.
National benchmarks climbed in all 17 western European markets that were open. The FTSE 100 gained 6.2% or 251 points to 4300 as BHP and Anglo American led the advance.
France’s CAC 40 rose 8.7% to 3247, with oil company Total jumping 11%. Germany’s DAX added 7.6% to 4716, led by Siemens.
Stock markets in Tokyo and Hong Kong jumped 5.2% and 8.7% respectively. The two markets were among the biggest gainers in a broad rally across Asia. In South Korea, the benchmark index finished 7.5% higher.
Commodities rebounded from last week’s losses on demand hopes from the US stimulus package.
Crude oil for January delivery rose $US2.92, or 7.2%, to $US43.73 a barrel in New York.
Copper and corn futures also rose.
The yen and the dollar have fallen the most against the euro in two weeks. The yen weakened 1.7% to 120.28 per euro and was down 0.2% to 92.99 against the dollar. The euro rose 1.6% to $1.2927.
In other overnight developments:
• UK factory prices fell for a fourth consecutive month in November, Output prices fell 0.7% on a month-to-month basis and were 5.1% higher on a year-to-year basis, the weakest annual rate of increase since December 2007.
• Chicago-based media company Tribune, which owns eight major newspapers and a string of local TV stations, has filed for Chapter 11 bankruptcy-court protection. The company has been in trouble since real-estate mogul Samuel Zell led a debt-backed deal to take the company private last December.
• Dow Chemical, the largest US chemical maker, will eliminate 11% of its workforce, close plants and sell businesses.
• Hungary’s central bank cut the EU’s highest benchmark interest rate in a surprise move. The benchmark rate was cut one percentage point after an emergency 3 percentage-point increase on October 22, the biggest increase in five years.