Stocks, euro jump as U.S., ECB may help Europe
NEW YORK (Reuters) - World stocks and the euro jumped on Wednesday after Washington showed readiness to further support debt-burdened euro-zone countries and investors bet the European Central Bank could step up its bond-buying program.
Better-than-anticipated economic data in China, Europe and the United States also whetted investors' appetite for risk globally, driving major U.S. and European stock indexes up more than 2 percent.
Portuguese debt costs fell along with those of other peripheral euro-zone countries as some investors bet the ECB will take further action at its meeting on Thursday.
Portugal was also able to sell 500 million euros in 12-month T-bills but, in a sign of sagging investor confidence in the country, yields paid on the debt rose to a euro lifetime record of 5.281 percent, from 4.813 percent two weeks ago.
The euro jumped 1.1 percent and traded above $1.31, also boosted by news that the United States would be ready to support the extension of the European Financial Stability Facility via additional commitment of cash from the International Monetary Fund.
"The market's been caught short on euros. Periphery yield spreads have tightened somewhat, and the market is pricing in the possibility that the ECB won't be too aggressive tomorrow," said Geoffrey Yu, currency strategist at UBS.
Some analysts warned, however, that the rebound of the European single currency seemed to be just temporary.
"I think this is just caution ahead of the ECB meeting tomorrow," said Vassili Serebriakov, senior currency strategist at Wells Fargo in New York. "If anything, this is a very tentative bounce until we hear from the ECB tomorrow."
Others said dramatic action after the ECB policy meeting on Thursday was unlikely, but that the spreading euro-zone debt crisis demanded radical measures at some point.
ECONOMIC DATA BOOST
Appetite for risky assets also got a boost from better-than-expected Chinese factory data in November, which showed one of the world's largest economic engines was in good health.
In Europe, the euro zone's manufacturing sector expanded at its fastest pace in four months in November, led by heavyweights Germany and France. Britain's manufacturing hit a 16-year high.
U.S. private sector payrolls also registered their biggest rise in three years in November, ADP Employer Services said, lifting optimism about the job market ahead of Friday's key government employment report.
"We're going to focus more on China's data today and the fact that the ADP report came in better than expected," said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York.
The MSCI All-Country World Index .MIWD00000PUS climbed 2.1 percent after three consecutive sessions of losses.
The Dow Jones industrial average .DJI rose 244.42 points, or 2.22 percent, to 11,250.44, while the Standard & Poor's 500 Index .SPX jumped 25.02 points, or 2.12 percent, to 1,205.57. The Nasdaq Composite Index .IXIC shot up 56.59 points, or 2.27 percent, to 2,554.82.
In Europe, the FTSEurofirst 300 .FTEU3 rose 2.06 percent, its biggest one-day gain in three months, to finish at 1,089.16. Shares of miners led the market higher after the strong factory output data from top metals consumer China.
Emerging market stocks measured by a MSCI benchmark index .MSCIEF jumped 2.2 percent.
The positive economic data also encouraged investors to step out of the safe-haven dollar and Treasuries.
The U.S. dollar slid 0.66 percent against a basket of major currencies, according to the U.S. Dollar Index .DXY.
The benchmark 10-year U.S. Treasury note lost more than 1 point in price, boosting its yield to 2.942 percent from 2.8 percent late Tuesday.
Commodities also posted gains, with U.S. crude oil prices jumping 2.8 percent, or $2.32, to $86.43 per barrel. The spot price of gold edged up 0.5 percent to $1,391.40 an ounce.
(Reporting and writing by Walter Brandimarte; Additional reporting by Rodrigo Campos and Gertrude Chavez-Dreyfuss; Editing by Jan Paschal)
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