GLOBAL MARKETS-Stocks and euro pare advance on Boehner comments

Thu Nov 29, 2012 7:16pm GMT

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* U.S. fiscal talks the big driver of markets globally
    * U.S. Treasuries prices rise as debt talks drive safety bid

    NEW YORK, Nov 29 (Reuters) - U.S. stocks and the euro pared
some gains on Thursday after top Republican lawmaker John
Boehner said there had been no substantive progress in the last
two weeks in talks to reach a budget deal.
    Boehner, the speaker of the U.S. House of Representatives,
said he had no idea what compromises President Barack Obama is
willing to make on spending cuts. He said U.S. Treasury
Secretary Timothy Geithner, the White House's top liaison to
Congress whom he met on Thursday, gave no new substantive plan
for reaching an agreement on the budget. 
    Boehner's comments rattled investors who had earlier driven
a benchmark world stock index to a three-week high alongside a
rally in the euro and commodities. Hopes had risen that U.S.
political leaders would reach a deal to avert $600 billion in
spending cuts and tax hikes that some economists believe could
tip the world's biggest economy back into recession.
    U.S. Democratic Senate leader Harry Reid on Thursday said
Democrats are still waiting for a reasonable proposal from
Republicans to resolve a stalemate over the so-called fiscal
cliff of tax hikes and spending cuts looming at year's end.
.
    "When the sentiment is that nothing is going to get done, it
does create a lot of anxiety and selling pressure. If there's
any sense of progress, then the market seems to rally," said
Eric Kuby, chief investment officer at North Star Investment
Management in Chicago. "I think we're hostage to this for the
rest of the year."
    The fiscal cliff is the biggest risk facing global markets
in the final weeks of the year, following an agreement earlier
this week on fresh aid for Greece. 
    The Dow Jones industrial average was up 48.09 points,
or 0.37 percent, at 13,033.20. The Standard & Poor's 500 Index 
 was up 7.03 points, or 0.50 percent, at 1,416.96. The
Nasdaq Composite Index  was up 19.50 points, or 0.65
percent, at 3,011.28. 
    The MSCI global equities index was up 0.9
percent at 332.42 points, after earlier touching its highest
level since Nov. 7.
    The FTSE Eurofirst 300 index finished up 1.1
percent, with the close of stock markets there almost coinciding
with Boehner's comments. It was the highest close for the
benchmark European index since July 2011. Mining stocks, which
are seen as among the riskiest equity sectors because they are
more sensitive to changes in economic sentiment, were the best
performers. 
    Good demand at a bond sale by Italy, where yields fell to
their lowest level in two years, added to signs the crisis in
the euro area has begun to ease and helped bolster optimism
earlier in the global day. 
    Traders said until a deal was done in Washington, share
markets were likely to remain skittish. U.S. government debt
prices rose on Thursday on safe-haven demand from investors who
were rattled about the progress of budget talks in Washington. 
    The benchmark 10-year U.S. Treasury note was up
5/32, with the yield at 1.6147 percent.
    There is very little conviction with all the political
headlines," said Carl Lantz, chief U.S. interest rate strategist
at Credit Suisse in New York.
 
    
    RISK FLOWS CHANGE
    Safe-haven German government bonds fell as investors
returned to riskier assets before Boehner's comments, edging the
benchmark 10-year debt yields up slightly to 1.37 percent
.
    The better tone allowed Italy to auction successfully six
billion euros ($7.75 billion) of new five- and 10-year debt,
which was expected to complete Italy's funding needs for the
year. The yield on the 10-year bond was around
the lowest since November 2010. 
    Spain announced it would sell some more bonds at an auction
on Dec. 5, although it has completed raising all the money it
needs for this year.
    Italian and Spanish debt have benefited in recent months
from the European Central Bank's pledge to buy sovereign debt if
countries ask for aid first. Although that has not happened yet,
the prospect of a central bank backstop has made investors
reluctant to sell and has pushed them back into those markets.
    A fall in Italian and Spanish yields helped lift the euro
against the dollar by 0.2 percent to $1.2973, with the
hopes for a U.S. fiscal deal adding to support for the common
currency. 
    Commodity markets also got some support from the U.S. fiscal
deal hopes, while mounting tension in the Middle East bolstered
oil prices on supply concerns. U.S. crude oil futures 
rose $1.62 to $88.11 a barrel, and Brent climbed $1.38
to $110.90 a barrel.     
    Spot gold was up 0.5 percent at $1,727.34 an ounce,
after a 1.3 percent tumble on Wednesday, the biggest daily
decline in nearly four weeks.
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