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GLOBAL MARKETS-Euro rises on ECB talk of stemming debt crisis
July 25, 2012 / 5:30 PM / 5 years ago

GLOBAL MARKETS-Euro rises on ECB talk of stemming debt crisis

* Euro gains on ECB official’s comments

* U.S. data keeps equities under pressure

* Weak German Ifo data adds to growth worries

* Concerns over Spain and Greece persist (Updates prices, comment)

By Rodrigo Campos

NEW YORK, July 25 (Reuters) - The euro rose on Wednesday, helped by suggestions that European policymakers will find more ways to stem the region’s debt crisis, but weak global economic data and an earnings disappointment from Apple kept stocks under pressure.

The S&P 500 fell after data showed a large drop in new home sales, but the Dow rose after manufacturers Caterpillar and Boeing lifted their 2012 forecasts.

Apple Inc, the world’s most valuable company, posted a rare miss in revenue and earnings late on Tuesday. Its stock fell 4.2 percent to $575.14, weighing on the Nasdaq composite index and the overall market.

Support from central banks has been expected by markets for weeks as economic data sags globally. A weak reading on Britain’s gross domestic product and a German business sentiment survey added to worries about slowing growth.

Top Fed officials recently spelled out what measures they might take to boost growth and hiring. Fed action could come as soon as next week, as its policy-setting committee meets Tuesday and Wednesday.

ECB Governing Council member Ewald Nowotny said there were arguments for giving Europe’s new permanent rescue fund a banking license, enabling it to borrow unlimited central bank money and boosting its capacity to prevent the euro zone debt crisis from spreading.

Analysts said the market may have put too much emphasis on the comments, given other ECB officials’ opposition to the idea. Investors would likely sell into the euro’s rally, the analysts said.

“The market is desperate and jumping on anything that even looks remotely positive,” said Geoff Kendrick, currency strategist at Nomura.

Further supporting the single currency, Spain and France said that for stability a single supervisory mechanism for the bloc’s banks needs to be adopted by the end of the year.

The euro rose 0.6 percent to $1.2132, although the outlook remains weak and it is only just above a two-year low of $1.2042 hit Tuesday.

The single currency pared some of its initial gains against the dollar after data showed new U.S. single-family home sales in June fell by the most in more than a year and prices resumed their downward trend.

“We had a little bounce this morning on the Caterpillar and Boeing news. A little positive news certainly set the day off right, but certainly hard to sustain, given that there was competing negative news,” said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

The Dow Jones industrial average rose 35.42 points, or 0.28 percent, to 12,652.74. The S&P 500 Index dropped 2.49 points, or 0.19 percent, to 1,335.82. The Nasdaq Composite fell 9.73 points, or 0.34 percent, to 2,853.26.

The pan-European FTSEurofirst 300 index dipped 0.07 percent after the U.S. data and Wall Street’s decline reversed an earlier advance.

The MSCI world equity index edged 0.2 percent lower and has fallen 2.5 percent so far this week as concerns about the impact of Europe’s problems on growth spread across the world.

Despite a sluggish recovery and some analysts suggesting the U.S. economy may already be in recession, the S&P 500 hit its highest level in 2-1/2 months last week.

ECONOMIC GLOOM DARKENS

The gains in the euro came despite the weak economic data from Germany, which reinforced the view that even the European Union’s biggest economies were being damaged by the debt crisis.

German business sentiment dropped in July for the third straight month to its lowest level in over two years, according to the latest survey by the Munich-based Ifo think tank.

Greece was also back in the headlines with inspectors from the EU, ECB and International Monetary Fund in Athens to decide whether to keep it hooked up to a 130 billion euro lifeline or let it face default.

Three EU officials have said the team was likely to conclude Greece cannot repay what it owes, making a further debt restructuring necessary, but no decision is expected until at least September.

The benchmark 10-year U.S. Treasury note was down 7/32, with the yield at 1.4126 percent after earlier rising as high as 1.44 percent. The yield hit an all-time low on Tuesday.

Gold rose more than 1 percent as expectations of U.S. and European monetary stimulus strengthened its appeal as an inflation hedge. Gold futures jumped 1.7 percent to $1,602.50 an ounce. (Reporting by Rodrigo Campos; Additional reporting by Anna Louie Sussman and Nick Olivari; Editing by Kenneth Barry)

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