Stocks set to surge

By staff

LONDON( -- U.S. stock futures and world markets soared Monday after China signaled it would let its currency trade more freely.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were up more than 1% ahead of the opening bell.

Futures measure current index values against perceived future performance.

Last week, the Dow, the S&P and the Nasdaq ended higher for a second week, gaining more than 2% as buyers returned to the market following May's sell-off.

Investors became more confident in the global economy following news that China will let its currency trade more freely. As a result, stocks are likely to extend gains this week as well, said Peter Cardillo, chief market economist at Avalon Partners.

"The thinking is that a more flexible Chinese currency will help exports, and that means it will help the global economy, too. So in the short term this is positive for global markets and commodities," he said.

"But the stock market has been faring better on its own anyway, so it looks like we are headed for a nice summer rally just on technicals and domestic outlook," he added.

China: Investors around the world are cheering signs that China is prepared to relax its hold over its currency, the yuan.

On Saturday, China's central bank said on its Web site that it would enhance its exchange rate's "flexibility."

Since 2008, China has pegged the yuan to the dollar. Critics have said that by doing so China has held down the value of the yuan, thereby protecting its exporters.

World markets: Stocks around the world advanced as China's steps to end the peg of the yuan to the dollar boosted investors' confidence in the global economy.

In early European trading, France's CAC 40 surged 1.6%, Germany's DAX gained 1.4% and the FTSE 100 in Britain rose 1%.

Asian markets finished the session sharply higher. The Shanghai Composite climbed 2.9%, the Hang Seng in Hong Kong surged 3.1% and Japan's Nikkei rallied 2.4%.

Dollar and commodities: The dollar was flat against the euro but fell versus the British pound and rose against the Japanese yen.

U.S. light crude oil for July delivery rose $1.32 to $78.50 a barrel.

COMEX gold's August contract fell 10 cents to $1,257.30 per ounce. Gold closed Friday at a record high of $1,258.30 per ounce.

Bonds: Treasury prices fell, as the 10-year note's yield rose to 3.3% from 3.22% on Friday. Bond prices and yields move in opposite directions. To top of page

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