* Confidence on 'fiscal cliff' talks, financials boost Wall
* Expected loose policy in Japan hits yen; Draghi a drag on
* Dollar hits 20-month high vs yen
By Angela Moon
NEW YORK, Dec 17 Global shares rose on Monday,
supported by signs of tentative progress on negotiations over
the U.S. "fiscal cliff," while a win by Japan's conservative
Liberal Democratic Party lifted the dollar to a 20-month high
against the yen.
The biggest moves of the day came in the currency market
following a landslide election victory for Japan's LDP on
Sunday, which opened the way for a shift in economic strategy
in an effort to lift the world's third-largest economy out of
The triumph was seen as piling pressure on the Bank of Japan
to ease further at its next policy meeting, which ends on
Thursday, setting the stage for an even bigger fall in the yen.
Looser monetary policy and more spending would be expected to
weaken the currency, which would help make exports more
In the United States, Republican House Speaker John Boehner
signaled willingness to move closer to President Barack Obama's
demands as they try to avoid the automatic tax hikes and
spending cuts that would take place in the new year if no deal
"I think there's a lot of expectation that a fiscal cliff
deal of some sort does get done," said Joseph Benanti, managing
director of Rosenblatt Securities in New York. "People are going
to stay slightly positive, not overly enthusiastic, going into
the end of the year."
Uncertainty over if and when a federal budget deal will be
done has kept investors cautious in what is already a normally
quiet trading period heading into year-end.
Investors are worried the economy could slide back into
recession if the full brunt of the tax and spending changes is
allowed, though most expect a deal will eventually be reached.
In U.S. stock trading, nine of the S&P 500's 10 sectors were
higher, led by financials, as the S&P Financial Index
gained 1.5 percent. Shares of Bank of America rose 2.8
percent to $10.87 and Citigroup gained 3.2 percent to
The Dow Jones industrial average was up 76.53 points,
or 0.58 percent, at 13,211.54. The Standard & Poor's 500 Index
was up 13.13 points, or 0.72 percent, at 1,423.78. The
Nasdaq Composite Index was up 30.00 points, or 1.01
percent, at 3,001.33.
The MSCI world equity index rose 0.4 percent
to 337.61 following a 0.5 percent decline in Asia share markets
outside Japan. The FTSE Eurofirst 300 index was down
The major debt markets, however, did take some encouragement
from the Boehner proposal on taxes, with the benchmark 10-year
U.S. Treasury note was down 13/32, with the yield at
If the S&P 500 sustains its gains through the session, the
index would snap a two-session losing streak. Despite the
uncertainty of "fiscal cliff" talks, the S&P has performed well
in the last month, grinding higher on mostly light volume.
The yen dropped to a 20-month low against the U.S. dollar.
Japan's former Prime Minister Shinzo Abe returns to power with
the LDP's victory. He campaigned on a platform to boost the
moribund economy with hyper-easy monetary policy and big fiscal
spending to beat deflation, a recipe for weakening the yen that
gives Tokyo an export advantage in international markets.
"The fact that the LDP secured a two-thirds majority gives
them a strong mandate and will lead to significant policy
changes," said Ian Stannard, head of European currency strategy
at Morgan Stanley.
"The yen weakening trend will be sustainable and dollar/yen
will move higher while euro/yen also has the potential to move
sharply higher." He said Morgan Stanley forecasts the dollar to
rise to 90-92 yen by the end of 2013, while the euro could rise
to 113 yen by the end of this year.
The euro rose against the yen as well, but its gains on the
U.S. dollar were undermined by European Central Bank President
Mario Draghi, who reiterated concerns over slow growth of
In New York trade, the greenback was up 0.31 percent to
83.70 against the yen, its best level since April 2011.
The euro climbed 0.36 percent to 110.29 yen but fell
back from its 8-1/2-month high of $1.3191 to trade at $1.3169,
up just 0.06 percent against the U.S. currency.
Brent crude prices dipped on Monday while U.S. oil futures
rose as news of a key U.S. pipeline expansion and optimism about
a deal to avoid the fiscal cliff prompted spread trading between
the two contracts.
Brent crude futures fell 32 cents to $107.86 a
barrel, having swung from $107.72 to $108.50. The front-month
U.S. January crude rose 62 cent to $87.35 a barrel, with
prices finding some resistance after briefly topping the 50-day
moving average at $87.66 a barrel.