Commodities rallied, with London Brent crude rising above $107 a barrel to hit a seven-week high as Middle East tension stoked supply worries. Corn and soybeans soared to record highs as a U.S. farm-belt drought worsened.
On Wall Street, investors cheered IBM's move to raise its full-year profit forecast late o n Wednesday, which bucked a recent trend of tech companies that cut outlooks. European shares hit a 15-week high after strong results from Electrolux and AkzoNobel.
The positive sentiment was tempered, however, by weaker-than-expected readings on US manufacturing, housing and labor markets. Adding to investor concern was a spike in Spain's borrowing costs, which stoked fears Madrid may eventually need a full-blown sovereign bailout.
“We've had more disappointment than not when it comes to data over the past few months, but for the moment investors are looking instead at what companies have to say, which is more important,” said Richard Sichel, chief investment officer who helps oversee $1.6 billion in assets at Philadelphia Trust Co.
The Dow Jones industrial average rose 28.61 points, or 0.22 per cent, to 12,937.31. The S&P 500 Index gained 3.92 points, or 0.29 per cent, to 1,376.70. The Nasdaq Composite Index advanced 22.95 points, or 0.78 per cent, to 2,965.55.
The MSCI world equity index gained 0.7 per cent to 314.90. European shares rose 1 per cent to 1,063.94.
The euro fell 0.2 per cent to $1.2258. It also lost 0.4 per cent to 96.33 yen and hit a record low against the Australian dollar.
Ten-year Spanish bond yields rose above the 7 per cent line seen as unsustainable after the country paid euro-era record yields for five-year funding as investors remain concerned about its finances and growth prospects.
“The risk is that yields could start rising also in shorter maturities, where Spain is doing most of the funding, and that will basically be game over for Spain,” said Gianluca Ziglio, a strategist at UBS.
Germany warned that Spain's financial troubles are far from over and its government should be ultimately responsible for European aid to its banks.
Ahead of a German parliamentary vote on aid for Spanish banks, that subsequently passed by a wide majority, Finance Minister Wolfgang Schaeuble said the mere perception of insolvency risk in Spain could cause contagion in the euro zone.
Brent crude gained for a seventh straight day, rising $1.71 to $106.87 a barrel after an earlier high of $107.48. U.S. oil gained $1.49 to $91.36.
The killing of several Syrian security chiefs on Wednesday and a deadly attack on Israeli tourists in Bulgaria, which Israel accused Iran of carrying out, fueled worries over the Middle East, the source of more than a quarter of the world's oil.
Spot gold rose to $1,587 an ounce.
Chicago Board of Trade spot September corn hit a record high $8.12 per bushel. August soybeans posted a record peak at $17.46-1/2. The month-long rally was fueled by fears of a food crisis similar to that in 2008, when riots broke out in some countries.
“I hesitate to use those words (food crisis) but the circumstances are more severe now than they were in 2008,” said Dennis Gartman, a commodity trader and editor/publisher of The Gartman Letter.
In the U.S. government debt market, the benchmark 10-year U.S. Treasury note was little changed, with the yield at 1.4942 per cent.
Factory activity in the US Mid-Atlantic region contracted for a third straight month in July and the number of Americans filing new claims for jobless aid surged last week, data showed on Thursday. A separate report showed home resales fell to the lowest level in eight months in June.
“While we believe that economic conditions have not deteriorated sufficiently to push the Federal Reserve over the edge, the odds of further policy action being taken in the near-term have clearly risen,” said Millan Mulraine, senior macro strategist at TD Securities in New York
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