Traders work on the floor of the New York Stock Exchange June 5, 2012.Brendan McDermid/Reuters
North American and overseas stock indices are up on Wednesday, as investors appear to be starting to price in some form of stimulus action by the world's most powerful central banks.
The European Central Bank today left its key lending rate at 1 per cent, which disappointed some investors. But markets seemed to take some comfort from president Mario Draghi's remarks at a press conference. He warned that the euro zone economy faces "increased downside risks." Speaking in Frankfurt he said, "we monitor all developments and we stand ready to act."
"With parliamentary elections coming up in Greece and France, Spain's banking crisis coming to a head and an EU summit scheduled for this month, it appears the central bank has kept its powder dry so that it can provide support in the coming weeks if needed," said Colin Cieszynski, an analyst with CMC Markets Canada.
In the U.S., Federal Reserve Bank of Atlanta President Dennis Lockhart said extending Operation Twist, a stimulus program to lengthen maturities of debt on the central bank's balance sheet, is an "option on the table," Bloomberg reported.
"There is capacity to do more, so it is an option on the table," Mr. Lockhart said today in response to audience questions after a speech in Fort Lauderdale, Florida. The policy-setting Federal Open Market Committee meets June 19-20 to consider whether more stimulus is needed after the economy added the fewest jobs in a year in May.
Investors will be watching this afternoon for the Fed's latest read on the U.S. economy, when the central bank releases its Beige Book.
In Toronto, the S&P/TSX advanced 116.62 points to 11,624.33 points, in a wave that encompassed all sectors and 8 out of every 10 stocks. The materials and energy sectors led the way, with each up about 2 per cent.
In New York, the Dow Jones industrial average rose 117.84 points to 12,245.79 points and the broader S&P 500 climbed 13.59 points to 1,299.09.
The possibility that markets could see another influx of capital helped lift commodity prices. The price of gold has gained $21.60 (U.S.) an ounce to reach $1,638.50. Oil is up 51 cents a barrel at $84.80. Copper is up nearly 2 per cent at $3.3465 a pound.
The Canadian dollar has risen 0.3 per cent to 96.67 cents (U.S.).