Buoyant data bolsters euro rally, Wall Street creeps higher

NEW YORK  (Reuters): Shares climbed across the euro zone on Tuesday after data showed robust growth, and Wall Street ticked higher as a U.S. federal budget proposal called for slashing healthcare programs and boosting military spending.

Businesses across the euro zone were on their strongest run since 2011, according to IHS Markit’s Flash Composite Purchasing Managers’ Index for May. It matched the previous month’s 56.8, its highest since April 2011. A reading above 50 indicates growth.

“It’s a very good result and it’s broad-based. We’ve got a good pace of growth here. The fact we have maintained this high level in May is great news for second-quarter GDP,” said Chris Williamson, chief business economist at IHS Markit.

The pan-European FTSEurofirst 300 index rose 0.29% and MSCI’s gauge of stocks across the globe gained 0.14%.

The euro had hit a six-month high but retreated as traders locked in some of this month’s 3.5% surge, while a suicide bombing in Britain subdued the pound after more signs of a drop in the UK economy dented it.

The bombing of a pop concert in Manchester killed 22 people and wounded dozens. Sterling had fallen but rose 0.8% in mid-day trading to $1.3010. “Increasingly the markets are just more and more numb to these. As bad as they are and as horrific as they are, the market immediately looks through these things and uses these as buying opportunities more than anything else,” said Brad Bechtel, managing director FX at Jefferies in New York.

In the United States, investors looked to President Donald Trump’s first full budget plan, released on Tuesday.

It calls for an increase in military and infrastructure spending but also a raft of politically sensitive cuts, including to healthcare and food assistance programs for the poor, with the aim of chopping government spending by $3.6 trillion and balancing the budget over the next decade.

“In the U.S. all eyes are on Trump’s budget proposal,” said Nadia Lovell, U.S. equity strategist at J.P. Morgan Private Bank in New York. “People will keep an eye on any sort of indication of corporate tax reform as well as infrastructure spending.”

The Dow Jones Industrial Average rose 37.26 points, or 0.18%, to 20,932.09, the S&P 500 gained 3.21 points, or 0.13%, to 2,397.23 and the Nasdaq Composite dropped 1.83 points, or 0.03%, to 6,131.79.

Emerging market stocks rose 0.07%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.25%, while Japan’s Nikkei lost 0.33%.

The dollar index against a basket of currencies rose 0.01%. The Japanese yen strengthened 0.19% versus the greenback at 111.12 per dollar, while sterling was last trading at $1.2977, down 0.16% on the day.