GLOBAL MARKETS-Stocks and euro higher but pressured by Boehner

Thu Nov 29, 2012 9:17pm GMT

Quotes

   

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

    NEW YORK, Nov 29 (Reuters) - U.S. stocks and the euro rose
on Thursday but remained pressured by comments from top
Republican lawmaker John Boehner, who indicated no substantive
progress in the last two weeks in talks to reach a U.S. 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. 
    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. Major U.S. indexes went
negative to little changed before investors began betting
rhetoric will not prevent a deal. 
    Hopes remain high that U.S. political leaders will 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.
    "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 ended up 36.71
points, or 0.28 percent, at 13,021.82. The Standard & Poor's 500
Index  was up 6.02 points, or 0.43 percent, at 1,415.95.
The Nasdaq Composite Index  was up 20.25 points, or 0.68
percent, at 3,012.03. 
    The MSCI global equities index was up 0.9
percent at 332.34, after earlier touching its highest level
since November 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 who were rattled about the progress of budget talks in
Washington. 
    The benchmark 10-year U.S. Treasury note was up
4/32, the yield at 1.6182 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
0.2 percent against the dollar to $1.2974, with 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 $1.33 to $87.92 a barrel and Brent climbed $1.04 to
$110.55 a barrel.     
    Spot gold was up 0.4 percent at $1,725.80 an ounce,
after a 1.3 percent tumble on Wednesday, the biggest daily
decline in nearly four weeks.