Shares gain on hopes for "cliff" deal; gold tumbles
NEW YORK (Reuters) - Global shares rose on Thursday as lawmakers in Washington continued to slog on in their negotiations over the U.S. "fiscal cliff," while gold prices tumbled to their lowest level since August on a burst of year-end selling.
Wall Street rebounded from early losses, after Republican House of Representatives Speaker John Boehner said he would keep working on a solution to the "fiscal cliff" while also slamming President Barack Obama's approach to the budget talks.
Republicans in the House pushed ahead with their own plan to avoid a series of steep tax hikes and spending cuts due in early 2013, complicating negotiations with the White House. Obama has vowed to veto the plan, which would raise taxes only on the wealthiest sliver of Americans.
"Speaker Boehner went on the air and basically told us he doesn't like what the president's doing or not doing, and the markets rallied on that, which was kind of weird," said Stephen Guilfoyle, a trader at Meridian Equity Partners in New York.
Investors have hoped for an agreement soon, but progress has been slow. Boehner said he expected to continue to work with Obama, but repeated his charge that the president and Senate Democrats were trying to "slow walk" the country over the fiscal cliff.
The lack of progress in Washington kept most markets in a virtual holding pattern. Currencies held to tight ranges in thin pre-holiday trade, and the euro see-sawed against the dollar. In commodities markets, U.S. crude oil futures edged higher while Brent futures slid in choppy trade.
The Dow Jones industrial average was up 59.75 points, or 0.45 percent, at 13,311.72. The Standard & Poor's 500 Index was up 7.88 points, or 0.55 percent, at 1,443.69. The Nasdaq Composite Index was up 6.02 points, or 0.20 percent, at 3,050.39.
NYSE Euronext was the day's biggest gainer, surging 34.1 percent to $32.25, after IntercontinentalExchange Inc said it would buy the operator of the New York Stock Exchange for $8.2 billion. ICE shares rose 1.4 percent to $130.10.
MSCI's world equity index, which has risen steadily over the past five weeks on optimism that a budget deal would clear the way for stronger growth in 2013, was up 0.2 percent to near 343 points on Thursday. It remains near levels last seen in July 2011.
In Europe, shares stuttered as indexes approached levels considered overbought. The FTSEurofirst 300 closed virtually unchanged at 1,142.80 points. The 14-day relative strength index, a widely used technical momentum indicator, stood at 67.5, close to the 70 and above level that is considered "overbought."
In currency markets, investors struggled to gauge developments on the U.S. budget talks against a backdrop of generally positive U.S. economic data.
The euro recouped earlier losses to gain 0.1 percent at $1.3226. On Wednesday, the euro hit an 8-1/2-month high of $1.3308. Still, market players were mostly positioned for a U.S. deal to be reached on time, with some expecting the euro to go as high as $1.3500 by early January.
Gold prices plunged below $1,650 an ounce, falling more than 1 percent as heavy liquidation by hedge funds and signs of an improving U.S. economy triggered a technical sell-off that sent prices to their lowest in four months.
Gold broke below its 200-day moving average as safe-haven bidding faded after a government report showed the U.S. economy grew at a faster-than-expected 3.1 percent annual rate in the third quarter.
Silver dived 4 percent, and platinum group metals fell around 2 percent.
"There is a concern among the hedge funds that they will have more redemptions because of the fact that they underperformed the markets this year as a whole," said Jeffrey Sica, chief investment officer of SICA Wealth Management, which has over $1 billion in assets.
Spot gold was down 1.3 percent at $1,645.10 an ounce, having hit a low of $1,635.09, the weakest since August 22.
Silver, which tends to have higher volatility than gold, was down 4.1 percent to $29.71, having hit a four-month low of $29.60 an ounce.
U.S. Treasuries prices pared earlier gains as Wall Street stocks climbed to session highs on revived optimism about a coming budget deal that will avert a U.S. fiscal crisis, which curbed some bids for bonds. The benchmark 10-year U.S. Treasury note was up 1/32, with the yield at 1.8014 percent.
In the oil market, U.S. crude settled 0.17 percent higher at $90.13 a barrel, after trading between $89.26 to $90.54 a barrel in a thin market. Brent crude settled slightly lower, however, down 16 cents at $110.20 a barrel. Both crude futures posted a weekly gain.
(Reporting by Angela Moon, additional reporting by Gabriel Debenedetti; Editing by Leslie Adler)
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