U.S. stocks turned cautious on financial sector earnings ahead of Citigroup Inc. After climbing 151 points, the Dow Jones Industrial Average closed at 12,482.22, up 60.16 points, or 0.5%. The S&P rose 4.57 points, to 1,293.66. The Nasdaq was up 17.41 points, or 0.6%, to 2,728.08.
The biggest driver of the market is the relative success of European sovereign debt auctions, and the story there is the stealth quantitative easing that is happening with the low-cost money going from the European Central Bank to European banks, which then can use the funds to purchase sovereign debt.
It’s the Merkozy carry trade, a reference to German Chancellor Angela Merkel and French President Nicolas Sarkozy, the combined force behind the European Union’s efforts to stem the euro-zone’s debt crisis.
Also helping the markets were results from China. Government figures pointed out that the slowdown in that nation’s economic growth in the fourth quarter of 2011 to have been less than thought, with Beijing showing a growth rate at 8.9%. Chinese GDP data are surprisingly reliable in being slightly better than expected; these numbers should support the case of an emerging markets soft landing.
Earlier in the day, EU markets climbed for a second day first based on the Chinese GDP figures and then supported by positive economic news from Germany inspired an asset rally. The ZEW indicator of economic sentiment leapt 32.2 points in January to reach minus-21.6 points, marking its highest level since July 2011. The indicator was at minus-53.8 points in December. The increase suggests that German economic activity is likely to stabilize over the next six months rather than deteriorate.
The Stoxx Europe 600 was up 0.9% to end at 253.27. In France, the CAC-40 jumped 1.4% to 3,269.99, while in Germany, the DAX 30 climbed 1.8% to 6,332.93, and the UK’s FTSE 100 gained 0.7% to 5,693.95