Stocks, dollar rise after US data

London: World stocks rose for a third straight session Wednesday and the dollar set a two-month peak against the yen after upbeat US housing market data fanned expectations for a solid recovery in the US economy.

Data showed on Tuesday that sales of previously owned US homes jumped to the highest level in nearly three years last month, offering the latest evidence that the housing market the main trigger of the worst US recession in 70 years is on the mend.

This fanned expectations that the Federal Reserve could raise interest rates sooner than its counterparts in the euro zone and Japan, sending the dollar higher and pushing US Treasury yields to four-month peaks. MSCI world equity index rose 0.4 per cent, on track to scoring one of the biggest annual gains in the past 20 years.

Momentum

"Some fund managers are making sure they've got good equity positions for the end of the year. There's still momentum in there, and it may carry on into the new year," said Justin Urquhart Stewart, director at Seven Investment Management.

The FTSEurofirst 300 index rose one per cent, with banks leading the gains. Emerging stocks gained 0.7 per cent. US stock futures were up around 0.4 per cent, pointing to a firmer open on Wall Street later.

Ten-year US Treasury yields rose as high as 3.773 per cent . Bund futures fell 21 ticks. Ten-year euro zone government bond yields hit a one-month high of 3.294 per cent.

The dollar rose as high as 91.87 yen. It was steady against a basket of major currencies.

Interest rate futures are pricing in the chance that the Fed may start raising rates in June.

Calyon says the correlation between the dollar index and US interest rate expectations, based on the June 2010 three-month futures contract, has been a lofty 0.82 over the last month.

US crude oil rise 0.3 per cent after data showed a sharp drawdown in US crude stocks.