U.S. shares buoy world stocks, euro suffers
NEW YORK (Reuters) - U.S. shares rose on Monday after consumer spending and factory activity data added to credibility about the economic recovery, giving life to European stocks that were capped by skepticism over a Greek debt bailout that pressured the euro.
Investors sought risk in stocks after a business group said factory activity grew at the fastest pace in nearly six years. An unexpected rise in construction spending completed the bullish U.S. data.
Investor sentiment also rose after UAL Corp UAUA.O, parent of United Airlines, said it plans to buy Continental Airlines Inc CAL.N for $3.2 billion to form the world's largest airline. An airlines index .XAL jumped 2.5 percent.
Measured optimism returned to markets after European countries agreed to an aid package worth 110 billion euro ($146.5 billion) for Greece over the weekend.
The bailout, the biggest ever for a single country, eased fears of a near-term sovereign debt default, but still needs parliamentary approvals and leaves open the question of whether other vulnerable European countries might also need help.
"Consumer spending is recovering and in a broader context, the leadership in the recovery is transferring to the consumers from corporations," said Guy Lebas, a fixed-income strategist at Janney Montgomery Scott in Philadelphia.
"Still the overall arching theme is that there are less safe-haven bids for Treasuries from the Greece situation," he added. "There is a first step toward a resolution, but we are not out of the woods with Greece yet."
In early afternoon trading the Dow Jones industrial average .DJI added 150.17 points, or 1.36 percent, to 11,158.78. The Standard & Poor's 500 Index .SPX rose 15.82 points, or 1.33 percent, to 1,202.51. The Nasdaq Composite Index .IXIC gained 38.44 points, or 1.56 percent, to 2,499.63.
Big manufacturers, including Boeing Co (BA.N), Caterpillar Inc (CAT.N) and 3M Co (MMM.N), were up between 1.3 percent and 2.4 percent, helping drive gains for the Dow index. Apple Inc (AAPL.O) rose 2.4 percent after it said it sold 1 million iPads in the tablet computer's first 28 days on the market.
Also lifting the technology sector, the PHLX semiconductor index .SOXX jumped nearly 3 percent.
World stocks as measured by MSCI All-Country World Index .MIWD00000PUS cut losses and eked out a 0.2 percent gain.
Europe's FTSEurofirst 300 .FTEU3 rose 0.2 percent to 1,065.56. Germany's DAX .GDAXI increased 0.5 percent, while Spain's IBEX 35 .IBEX fell 0.7 percent. UK and Japanese markets were closed for a holiday.
Strong quarterly earnings have helped boost equities in recent weeks. Of the 337 companies in the S&P 500 that have reported first-quarter results, 78 percent had profits that topped analysts' expectations, according to Thomson Reuters Proprietary Research. Nearly three-quarters of European firms beat market estimates, Thomson Reuters data showed.
In currencies, the euro fell as the Greek bailout removed the imminent threat of default but failed to dispel fears about whether the euro zone country would honor new pledges for drastic wage cuts and tax increases.
Markets were also wary of potential obstacles to the plan, since countries such as Germany require parliamentary approval before money can be released. Greece needs the first of the funds by May 19 to meet a big repayment to creditors.
The FTSE banks index .FTATBNK lost 1.3 percent in choppy trade, shedding initial gains after the European Central Bank said it would accept all Greek government bonds as security for loans, even if its credit rating fell further.
More short-term uncertainty was added to markets after China increased bank reserve requirements in a bid to tame liquidity and inflationary expectations.
The euro failed to hold initial gains after the Greek aid deal.
"For the moment, the threat of default on the part of the Greek government has been lifted, with the operative words here being 'for the moment,' said Dennis Gartman, an independent trader and author of The Gartman Letter. "More problems exist, and we should have every doubt -- a lesson drawn from history -- that Greece shall ... be able to abide by newly imposed austerity measures."
The euro declined 0.79 percent against the dollar to $1.319. Against the Japanese yen, the greenback rose 0.92 percent to 94.67, and the U.S. Dollar Index .DXY gained 0.64 percent to 82.387.
Ten-year Greek bond yields fell to 8.79 percent from 9.58 percent on Friday, and the premium investors demand to hold them rather than German Bunds declined.
Yield spreads for Portugal and Spain debt also narrowed, although modestly, and losses in German Bunds were contained as markets remained wary that other expensive measures might be needed to shore up other euro zone economies.
Portugal successfully bought back 1 billion euros of bonds expiring this month on Monday, offering reassurance to investors concerned the country might struggle to redeem its debt.
Yields on benchmark 10-year Bunds rose to 3.06 percent, while 10-year U.S. Treasuries increased 0.05 percentage point to 3.71 percent.
In energy and commodities prices, U.S. light sweet crude oil rose nearly 1 percent to $86.86 per barrel, and spot gold prices advanced $6.86, or 0.58 percent, to $1185.10.
(Additional reporting by Tamawa Desai, Atul Prakash and Kirsten Donovan in London, and Richard Leong and Steven C. Johnson in New York; editing by Jeffrey Benkoe)
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