GLOBAL MARKETS-Stocks and euro pare advance on Boehner comments

Thu Nov 29, 2012 7:58pm GMT

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* U.S. fiscal talks the big driver of markets globally
    * Boehner's comments only the latest headlines to influence
investors

    NEW YORK, Nov 29 (Reuters) - U.S. stocks and the euro were
higher on Thursday but pared gains 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 was
prepared to make on spending cuts. He said 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 leading world stock index to a three-week high alongside a
rally in the euro and commodities. Hopes were high 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 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 48.31 points,
or 0.37 percent, at 13,033.42. The Standard & Poor's 500 Index 
 was up 7.40 points, or 0.52 percent, at 1,417.33. The
Nasdaq Composite Index  was up 22.24 points, or 0.74
percent, at 3,014.01. 
    The MSCI global equities index was up 0.9
percent at 332.44 points, after earlier touching its highest
level since Nov. 7.
    The FTSE Eurofirst 300 index finished up 1.1
percent, with the close of European stock markets 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
early in the global day. 
    Traders said until a deal was reached in Washington, share
markets were likely to remain skittish.
    U.S. government debt prices rose on safe-haven demand from
investors were rattled about the progress of budget talks in
Washington. 
    The benchmark 10-year U.S. Treasury note was up
5/32, 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, leaving 
benchmark 10-year debt yields at 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 its funding needs for the year.
The yield on the 10-year bond was around the
lowest since November 2010. 
    Spain announced it would sell 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 yet happened,
 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
0.1 percent against the dollar to $1.2968, 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 $1.47 to $87.95 a barrel and Brent climbed $1.18 to
$110.69 a barrel.     
    Spot gold was up 0.5 percent at $1,727.26 an ounce,
after a 1.3 percent tumble on Wednesday, the biggest daily
decline in nearly four weeks.
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