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Global Stocks at Two-Week High on Upbeat U.S. Signals
Anirban Nag | August 30, 2011

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London. Global stocks rose to their highest in nearly two weeks on Tuesday, while safe haven assets like the Swiss franc and German Bunds were subdued, encouraged by signs that the U.S. economy was not headed towards a recession as yet.

 With big-ticket data like U.S. job numbers due later this week, many investors remain uncertain about a recovery in the world's largest economy, leaving risk for a correction in markets still trading at low holiday volumes.

But European shares rose 1.6 percent, tracking gains on Wall Street and in Asia, while London shares advanced 2 percent in early trade, catching up with the broader market after a holiday on Monday.

World stock markets, as measured by MSCI , rose 0.5 percent to their highest since August 18. The index is still down nearly 15 percent from a May high, however, after taking a hammering at the start of August due to growing pessimism about the U.S. economy as well as worries over Europe's sovereign debt crisis and banks.

"With consumer confidence, the (U.S) ADP jobs report, ISM Manufacturing, jobless claims and nonfarm payrolls report all due in the coming days, there is going to be a lot of nervousness around," said Ben Potter, strategist at IG Markets.

"The market could also be seen as vulnerable given it has rallied ahead of these big economic reports. We think a lot of participants will be employing a 'wait and see' approach as we navigate through the next few days."

Investors would also await the minutes from the Federal Reserve's last committee meeting on Aug 9 which could offer more clues on divisions among board members over further stimulus measures.

Still, the latest gains in stock markets encouraged some investors to switch out of safe-haven assets like the Swiss franc and core government bonds into higher-yielding currencies such as the New Zealand dollar.

An Italian bond auction later in the day will serve as a barometer of investor demand - and give more hints how much further the euro zone's debt crisis has to run - after recent bond purchases by the European Central Bank.

Reuters