Dow at another record high, European stocks at five-year high

NEW YORK: Wall Street mostly edged higher on Wednesday, with the Dow hitting another record, helped by a private payroll survey that bodes well for the monthly jobs report due at the week's end.

Improved labor market data from the private sector sparked the positive tone and boosted confidence for the U.S. government's payroll report on Friday. The data from payrolls processor ADP followed similarly strong reads on housing and the services sector, reports that have contributed to lifting the Dow to historic levels and pushing up the S&P 500 to just 1.5 percent below its own record close.

Continued support from the Federal Reserve and equity valuations that are considered attractive compared with other asset classes have also pushed shares higher, and while some continue to call for a pullback at recent levels, those factors staying in place could keep the positive momentum intact.

"When you reach a record high, it triggers introspection about whether we're overvalued, but I don't expect a pullback because the reasons we've climbed are still in place," said David Joy, chief market strategist at Ameriprise Financial in Boston. "The market has the opportunity to move higher until there's evidence those factors will die out."

Energy and material shares led the advance. Both sectors are closely tied to growth expectations. Peabody Energy rose 3.5 percent to $21.53, while Chevron Corp gained 0.5 percent to $118.47. Newmont Mining rose 3.7 percent to $40.01 while U.S. Steel Corp added 3.9 percent to $20.76. Freeport-McMoRan Copper & Gold Inc was the S&P 500's top percentage gainer, up 4.1 percent at $32.84.

The S&P 500 index is trading at 13.6 times estimated 12-month earnings, compared with around 14.9 times in October 2007 when the index hit its intraday high, according to Thomson Reuters data. This suggests that stocks are still about 9 percent cheaper than they were at the 2007 peak.

Relative to junk bonds, the earnings yield on the S&P 500 - the inverse of the P/E ratio and used for valuation comparisons with bonds - is around 7.5 percent - above the yield to maturity on junk bonds, which is around 6.5 percent, data showed, indicating that stocks have a better value than the riskiest corporate bonds.

The Dow Jones industrial average <.DJI> rose 42.47 points, or 0.30 percent, to 14,296.24, another record closing high. The Standard & Poor's 500 Index <.SPX> edged up 1.67 points, or 0.11 percent, to 1,541.46. The Nasdaq Composite Index <.IXIC> slipped 1.77 points, or 0.05 percent, to close at 3,222.36.

Shortly after Wednesday's trading began, the Dow punched through the previous session's intraday record, trading as high as 14,320.65.

On Tuesday, the Dow ended at 14,253.77, breaking through October 2007's record close of 14,164.53.

For the year, the Dow is up 9.1 percent.

Tech shares weighed on the Nasdaq, with Microsoft Corp down 0.9 percent at $28.09 after the European Union fined the company $731 million for failing to offer users a choice of web browser.

Google Inc dipped 0.9 percent to $831.38 after hitting an all-time intraday high earlier in the session.

The positive catalyst for Wednesday's advance came from signs of improvement on the jobs front. The slowly healing labor market has been one of the weaker spots of the recovery, but data on Wednesday showed private-sector hiring was surprisingly strong in February as companies added 198,000 employees.

It was an early look at the labor market two days ahead of the U.S. government's closely watched non-farm payrolls report on Friday, which is expected to show the economy created 160,000 jobs last month while the unemployment rate held at 7.9 percent.

"If payrolls come in under 150,000, that could knock the market off stride, but if we got anything north of 175,000, that would give another boost to the market in the short term," said Joy, who helps oversee $675 billion.

The larger S&P 1500 <.SPSUP> has already reached record highs, thanks to help from smaller-cap companies. The Russell 3000 Index <.RUA>, which measures the performance of the 3,000 largest U.S. companies, also hit a record intraday high earlier in the session.

The CBOE Volatility Index <.VIX> rose 0.4 percent, after previously gaining as much as 2 percent on the day as investors snapped up protection on concerns that the rally may run out of steam.

Staples shares tumbled 7.2 percent to $12.34 after the largest U.S. office supply chain reported lower-than-expected quarterly revenue and forecast weak earnings for the full year.

Roughly 6.3 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.48 billion shares.

About 53 percent of stocks traded on both the New York Stock Exchange and Nasdaq closed higher on Wednesday. - Reuters

European stocks hit highest since 2008 crash

LONDON: European stock markets rose to their highest since the 2008 financial crisis on Wednesday, helped by signs the U.S. economy is improving and expectations of more pledges of support for growth from major central banks.

The European Central Bank, the Bank of England and the Bank of Japan are all expected to stick to ultra-easy monetary policy at meetings this week, following on from reassurances by U.S. Federal Reserve officials that their stimulus program remains in place.

Analysts even see some scope for fresh action in Europe on Thursday, giving a 40 percent chance for more bond buying from the Bank of England and a 10 percent likelihood of an interest rate cut from the ECB.

That, combined with some encouraging economic data, drove Wall Street's Dow Jones industrial index <.DJI> to an all-time high on Tuesday, and world and European share indexes pushed higher on Wednesday.

"It's panic buying," said Nick Xanders, who heads up European equity strategy at BTIG. "At this stage everyone wants to buy it, everyone wants to get involved, and everyone is scared of underperforming."

The pan-European ESTOXX 50 <.STOXX50E> had gained 0.4 percent by 5.45 a.m. ET as Frankfurt's DAX <.GDAXI> jumped 1 percent and London's FTSE 100 <.FTSE> and Paris's CAC-40 <.FCHI> added 0.2 percent.

Those gains, coupled with a rise in Asian shares overnight, pushed the MSCI world index <.MIWD00000PUS> up 0.3 percent and just short of a new 4-3/4 year high.

"Indexes are breaking above big resistance levels, and this is creating room on the upside," said Lionel Jardin, head of institutional sales at Assya Capital, in Paris.

"The sentiment is that central banks are going to remain very accommodative for a while, and at the same time companies are in really good shape, with strong cashflows."

EUROPEAN OUTLOOK

Still, with the ECB's meeting in view and worries over the euro zone's debt crisis again on the rise due to Italy's political deadlock, German government bonds recovered some poise after a sell-off in the previous session.

The Bund future was fractionally higher at 145.06 after dropping by around half a point on Tuesday, while Italian and Spanish government bonds also saw minor gains.

Italian center-left leader Pier Luigi Bersani, whose PD party won most votes in last week's inconclusive election, presents his policy plans to his party later. It could be significant if he produces enough to draw support from populist leader Beppe Grillo's Five Star Movement.

After a steady start, the euro was down 0.2 percent against the dollar at $1.3030 as traders waited to see whether the recent disappointing euro zone data and ongoing debt worries would be enough to see the ECB surprise consensus and cut rates on Thursday.

As expected, official data confirmed the euro zone ended the year in its second recession since 2009. Eurostat fleshed out its numbers, showing Germany as the only major euro zone economy to grow in the quarter, at a crawl, while France, Spain and Italy all contracted.

"There's reasonable downside to the euro. The situation in Italy is still uncertain," said Bill Diviney, currency strategist at Barclays.

"Although we don't expect any big changes to President Draghi's stance, he's going to stay fairly dovish, given uncertainties," he added.

COMMODITIES DRIFT

Growth-linked currencies were another beneficiary of the broader improvement in sentiment. The Aussie dollar rose 0.2 percent to $1.0280 as data showing moderate economic growth helped it extend its recovery from Monday's $1.0116 eight-month low.

Commodity markets were more mixed, however, following sharp rises in the previous session.

Despite the increasingly positive mood, there are still some areas of concern, namely the Chinese government's move to cool the country's overheated property market, the possible economic impact of U.S. spending cuts, and the deadlock in Italy.

Brent oil fell 0.3 percent back towards $111 a barrel following news of Venezuelan President Hugo Chavez's death, copper traders took profits after two days of gains, while gold edged up 0.2 percent to $1,575 an ounce.

"In the next few days, central bank meetings are on the agenda, and after some economic indicators have surprised to the downside in February, market participants expect renewed assurance that monetary policy will remain expansionary for quite some time," Credit Suisse said in a note. - Reuters

SE Asia Stocks-Up on Dow rally; Indonesia, Philippines hit record high

BANGKOK: Southeast Asian stocks rose on Wednesday as a record close on Wall Street lifted appetite for riskier assets and gains in large caps such as PT Telekomunikasi Indonesia led Indonesia to all-time highs.

Indonesia's Jakarta Composite Index snapped two days of losses to close at 4,824.68, above its record close of 4,811.61 hit on March 1.

Investors bought large-caps such as PT Telekomunikasi Indonesia, which jumped almost 6 percent. In a statement released after market hours, the company said its 2012 net income rose 17.2 percent, due to strong revenue growth.

The Philippine Composite Index climbed 1.8 percent to 6,835.21, its new all-time closing high, with conglomerate Alliance Global Group Inc up nearly 5 percent.

It is now Asia's best performing bourse with a year-to-date gain of 17.6 percent.

In Bangkok, the main SET index was up 0.65 percent at 1,559.35, the highest close since January 1994. However, turnover was relatively weak, falling to 68 percent from a monthly average.

The MSCI's broadest index of Asia-Pacific shares outside Japan gained nearly 1 percent while the MSCI's index of Southeast Asia was up 1.2 percent. - Reuters