While you were sleeping: US growth excels
Aug 30 (BusinessDesk) – Wall Street gained as the US economy grew more than expected in the second quarter, bolstering expectations that the Federal Reserve will start easing its monetary stimulus as the pace of the recovery gathers steam.
US gross domestic product increased at a 2.5 percent annualised pace in the second quarter, up from an initial estimate of 1.7 percent, according to Commerce Department data. It exceeded the 2.2 percent rate predicted by economists polled by Reuters and Bloomberg News.
“The economy is doing fine,” Brian Jones, a senior US economist at Societe Generale in New York, told Bloomberg. “Growth will accelerate in the second half.”
The strength in the world's largest economy cemented expectations the Fed will soon start easing back its US$85 billion-a-month bond-buying program.
"The upward revision today does help cement the decision to start tapering," Stuart Hoffman, an economist at PNC Financial in Pittsburgh, told Reuters.
Separately, the number of Americans filing new claims for unemployment benefits fell 6,000 to 331,000 last week, underpinning recent signs of a cautious recovery in the labour market—a key gauge for the Fed to determine the future of its stimulus program.
In late afternoon trading in New York, the Dow Jones Industrial Average rose 0.34 percent, the Standard & Poor's 500 Index gained 0.39 percent, while the Nasdaq Composite Index advanced 0.88 percent.
Gains in Verizon and Boeing led the Dow higher.
Shares of Verizon rose, last up 2.4 percent, amid reports the company is in talks to buy Vodafone's 45 percent stake in Verizon Wireless.
Verizon and Vodafone were discussing a sale for about US$130 billion in talks that had resumed a few weeks ago, Reuters reported, citing a person familiar with the situation, who asked not to be named. The person said on Thursday that an announcement could come as soon as the first week of September.
Shares of Vodafone rallied 8.2 percent.
In Europe, the Stoxx 600 Index climbed 0.8 percent from the previous close. Germany’s DAX added 0.5 percent, France’s CAC 40 increased 0.7 percent, while the UK's FTSE 100 Index rose 0.8 percent.
Germany's unemployment posted a surprise increase in August, rising for the first time in three months. Still, analysts said it did not change the outlook for the country's recovery.
"We would not read too much into the August uptick in the number of unemployed, which could be due to seasonal effects,” Thomas Harjes, senior European economist at Barclays in Frankfurt, told Bloomberg. “The robust job creation and decline in the unemployment rate since 2009 should be a key factor of support for the current federal government.”