US stocks as good as gold

Published in the Sunday Telegraph, June 2010

US stocks ended the week more than 2 per cent higher amid optimism over the global economic recovery, but as Wall Street braced for a volatile week with a heavy dose of US economic data.

The rise was led by shares of minerals companies after gold prices settled at another record high and some stability in debt-stricken Europe also buoyed confidence.

It comes after the Australian share market also closed higher, with big miners and gold stocks pushing the market up on a quiet day of trade.

The All Ordinaries index added 27.1 points or 0.6 per cent to 4574.1 points.

Wealth Within chief analyst Dale Gillham said investors remained cautious despite the market's recovery to a one-month high on Wednesday.

"Despite the general upward movement of the market over the past week, the rise hasn't been convincing," he said.

"We are now at the end of the third week of June and the All Ordinaries Index has only risen 2 per cent for the month."

David Jones recovered from an initial slump after announcing the resignation of CEO Mark Mclnnes, to finish two cents down at $4.49.

BHP Billiton rose 31 cents to $39.13, with rival Rio Tinto gaining 78 cents to reach $70.85.

The Dow posted its second consecutive weekly gain, after being down for three weeks.

Investors have been trying to determine whether the stockmarket's "correction" is over. A correction is usually considered a drop of 10-20 per cent from a recent peak. The Dow has risen 6.4 per cent from its lowest close of the year on June 7, but it's still down 6.7 per cent from the 2010 high of April 26

Trade was notably slower than the roller-coaster session of previous weeks, analysts said.

"Whether the slower action is the result of market participants taking a breather following the volatile activity over the last two months or the beginning of a summer lull remains to be seen," said analysts at

One notable exception was New York-listed shares in British oil giant BP, which were hit hard after the massive oil spill in the gulf and as its credit rating was slashed by top rating agencies.

BP's shares fell 6.5 per cent for the week, after trading close to 52-week lows in the middle of the week. The focus of next week's trade is sure to be a meeting of the Federal Reserve's policy-making body on Tuesday and Wednesday.

It is expected to vote to keep interest rates unchanged at virtually 0 per cent as the economy continues to be dogged by unemployment concerns.

In London, the stock market is eagerly awaiting next week's emergency budget amid investor hopes that Britain's new coalition government will outline clear plans to fix the nation's huge public deficit.

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