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US, European stock market indices up

23 December 2009 08:03 (UTC +04:00)

Baku- APA-Economics. Stock futures retreated from their highs Tuesday after a report showed economic growth in the third quarter was not as strong as previously forecast.
However, investors appear to be shaking off the worse-than-expected data as the economy is still showing signs of growth. Stocks are set to open higher.
Overseas markets strengthened. A report that the British economy did not contract as much as previously thought in the third quarter sparked a rally in Europe.
The U.S. government said the nation’s economy grew at an annual rate of 2.2 percent in the third quarter, smaller than the previous estimate of 2.8 percent. The Commerce Department cut the reading because consumers didn’t spend as much, commercial construction weakened and companies reduced inventories.
But the economy returned to growth during the quarter after a record four straight quarters of decline, and many analysts believe the economy is on track for a better finish in the current quarter.
Traders are awaiting a report that is expected to show sales of existing homes rose to their highest level in nearly three years. Economists predict home sales rose 2.5 percent to a seasonally adjusted annual rate of 6.25 million in November, from 6.1 million in October.
A sharp decline in sales and home prices coupled with rising defaults helped push the nation into recession. Any signs of improvement in the market would further boost confidence in the speed of the recovery.
The National Association of Realtors’ report is scheduled to be released at 10 a.m. EST.
Ahead of the opening bell, Dow Jones industrial average futures rose 29, or 0.3 percent, to 10,371. Standard & Poor’s 500 index futures rose 3.50, or 0.3 percent, to 1,111.70, while Nasdaq 100 index futures rose 8.00, or 0.4 percent, to 1,833.50.
Trading is expected to be light throughout the holiday-shortened week, which can exaggerate price swings. The market is closed Friday for Christmas.
Stocks are set to extend gains into Tuesday after moving sharply higher a day earlier. Corporate dealmaking and a push toward healthcare overhaul on Capitol Hill fueled big gains. Major indexes rose about 1 percent.
Among the deals, French drug maker Sanofi-Aventis SA said Monday it plans to buy U.S. health care products company Chattem Inc. for $1.9 billion, and mining equipment maker Bucyrus International Inc. said it will acquire Terex Corp.’s mining equipment division for $1.3 billion.
Corporate acquisitions are often seen as a sign of an improving economy as companies that had held onto cash during a downturn look for new places to invest their money.
International deals continued Tuesday, as Boston-based State Street Corp. agreed to buy the securities services business of Italian banking group Intesa Sanpaolo for $1.87 billion.
Meanwhile, bond prices continued to fall as optimism for recovery grows. Investors typically sell long-term bonds during a rebound because of fears inflation will increase during that time. Inflation is bad for bonds because it eats into their fixed returns.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.68 percent late Monday. The yield on the 10-year note reached its highest level since August earlier in the day.
The yield on the three-month T-bill, considered one of the safest investments, rose to 0.08 percent from 0.05 percent. Short-term rates remain low because they are closely tied to interest rates set by the Federal Reserve. The Fed has said it has no plans to alter rates in the coming months. The growing gap between short- and long-term bonds provides further evidence investors are becoming more confident.
The dollar was mixed against other major currencies, while gold prices declined to their lowest level since early November.
Overseas, Japan’s Nikkei stock average rose 1.9 percent. In afternoon trading, Britain’s FTSE 100 rose 0.9 percent, Germany’s DAX index gained 0.2 percent, and France’s CAC-40 rose 0.6 percent.