Stocks do very well despite mixed economic data

The economic data out of the US yesterday were mixed. From Reuters:

The Philadelphia Federal Reserve Bank said the pace of business expansion in the region slowed and prices paid by manufacturing businesses also dipped. But its new orders index jumped sharply this month from May's level.

Earlier, the New York Fed said activity among New York manufacturers and prices they paid showed a surprising jump in June, while a Labor Department report showed initial claims for unemployment benefits dropped last week to the lowest in nearly four months, a sign of resilience in the labor market.

The reports overshadowed data from the Federal Reserve showing an unexpected decline in U.S. industrial output for May and cemented expectations that the Fed will raise rates again by a quarter-percentage point when it meets later this month.

Nevertheless, stocks did very well yesterday.

The Dow Jones industrial average rose 198.27 points, or 1.83 percent, to 11,015.19, closing above the 11,000 level for the first time in more than a week. The Standard & Poor's 500 Index made its biggest one-day gain in more than 2-1/2 years, rising 26.12 points, or 2.12 percent, at 1,256.16. The Nasdaq Composite Index was up 58.15 points, or 2.79 percent, at 2,144.15...

Speaking before the Economic Club of Chicago, Bernanke said inflation expectations had "fallen back somewhat" and that the impact of high energy prices on the economy has been limited. That offset worries from earlier this week when core consumer and producer price data rose above expectations.

But if you were an equity investor, the place to be yesterday was Colombia. From Reuters:

Colombian stock prices rose a record 15.8 percent on Thursday as investors snapped up shares hit by a recent flight to safe-haven assets prompted by higher world interest rates.

If stocks around the world were hot yesterday, the same could be said about most of the economic data.

The Bank of Japan left both its economic assessment and interest rates unchanged yesterday as its tertiary index rebounded 1.3 percent in April after falling the two previous months and its index of leading economic indicators was revised upward to 54.5 from the preliminary reading of 50.0.

However, the Chinese authorities may have to do some cooling fast after data showed that urban fixed asset investment rose by 30.3 percent in the first five months of 2006 compared with the same period last year, accelerating from the 29.6 percent recorded in the first four months.

The European Central Bank also worried about inflation in its latest monthly report, summarised by Bloomberg.

"Upside risks to price stability over the medium term prevail," the Frankfurt-based central bank said in its monthly report published today. "Interest rates are still low by historical standards" after last week's increase...

Economic growth "is broadening and becoming more sustained," the ECB said. "The conditions are in place for growth in the euro area to remain close to its trend potential rate, despite the impact of the rise in oil prices." The ECB puts the region's potential growth rate at around 2 percent.

The ongoing World Cup appears to have made many in the UK happy though, and not just because England won its match yesterday; data released yesterday showed that retail sales rose 0.5 percent last month, boosted by a jump in electrical goods, including flat-screen televisions. On the other hand, a survey by the Confederation of British Industry and property advisers GVA Grimley showed that demand for commercial property has slowed to its weakest in a year.