U.S. stocks got an early boost after Germany's Federal Constitutional Court decided to throw out a request for an injunction against the European Stability Mechanism bailout fund. The mood also picked up after some heartening overseas data.
While ruling in favor of the ESM, the court also imposed conditions whereby German liability on the fund should not rise beyond €190 billion without parliamentary approval.
"Beyond this soft cap, the court is clear that political decisions on European integration and crisis management have to be taken by democratically elected people, which is a very soft stance as there seems to be nothing in terms of constitutional constraints on further integration," said Chris Walker, a strategist at UBS. "It is probably the most market-friendly outcome investors could have hoped for."
The ESM can now be formally approved soon; the ESM's first board meeting is expected in October."The ruling simply removed a near term item that was more speed bump than hurdle," commented Dan Greenhaus, chief global strategist at BTIG. "The constraints specified by the court aside, what matters for U.S. investors is less clear." The FTSE in London was down 0.32% after staying in the green for much of the European session. The DAX in Germany gained 0.31% and was off session highs. On Wednesday, data showed that eurozone industrial production turned sharply higher in July and UK jobless claims fell more than expected in August. The Hong Kong Hang Seng index settled up 1.10% and the Nikkei in Japan closed up 1.73% after Chinese Premier Wen Jiabao indicated that there's much room for the use of fiscal and monetary tools to help bolster the world's second largest economy and Japanese machinery orders rose more than expected in July. The benchmark 10-year Treasury lost 16/32, lifting the yield to 1.762%. The greenback fell 0.25%, according to the dollar index. October crude oil futures settled down 16 cents at $97.01, while December gold futures fell $1.20 to settle at $1,733.70 an ounce. In U.S. economic news, the Commerce Department said wholesale inventories rose 0.7% in July, up the most in five months. Economists were expecting an increase of 0.2% after a decline of 0.2% in June.