US stocks rally after six weeks of losses

THE US stock market last night ended a six-week losing streak, the longest since 2002, as more benign figures emerged on the economy and worries over Greek debt began to ease.

Share prices rose in New York after Germany signalled that it might give Greece billions of euros to help the country avoid a catastrophic default on its debts. German chancellor Angela Merkel indicated that private investors would not be forced to share the pain of a second bail-out.

The news from Berlin and a political shake-up in Athens raised hopes that Greece would get a second package of emergency loans and avoid a default, which at one point on Wednesday seemed to be just weeks, if not days, away. Greek stocks rose more than 5 per cent, and the euro recovered much of the ground lost since Wednesday.

Street protests in Athens this week prompted new worries that the embattled Greek government would not be able to pass austerity measures being demanded by international lenders. That undermined confidence in Europe's shared currency and prompted investors to dump stocks in favour of safer assets like the dollar and US government bonds.

Revived hopes for a second package of financial aid for Greece saw the Dow Jones industrial average gain 0.4 per cent yesterday, closing at 12,004. The Standard & Poor's 500 index gained 0.3 per cent. It was the first time both indexes finished the week higher since late April.

Unexpectedly strong data this week suggested that this spring's dismal numbers were a result of temporary disruptions such as Japan's earthquake, not a long-term slowdown.

The gains this week have been modest and uneven. But they signalled a pause in this spring's sell-off. Earlier this month, some traders locked in profits amid fears that this year's strong bull market was due a correction.

That now appears less likely. Stronger data this week on jobs, home construction and industrial output appear to confirm the earlier consensus that the recovery is proceeding slowly, but steadily, and will gather strength some time next year.