Stocks up, euro dips as technicals offset Spain worry

NEW YORK Tue Jun 26, 2012 5:22pm EDT

Traders work on the floor of the New York Stock Exchange June 11, 2012. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange June 11, 2012.

Credit: Reuters/Brendan McDermid

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NEW YORK (Reuters) - Wall Street stocks rose and the euro fell to its lowest level versus the U.S. dollar in over two weeks on Tuesday, as technical buying offset a near tripling in Spanish debt costs on doubts a European summit can ease the region's debt crisis.

Low expectations for the meeting in Brussels on Thursday and Friday helped drive Spanish short-term borrowing rates to their highest in more than six months when the country sold just over 3 billion euros ($3.8 billion) of three- and six-month debt. <ID:L6E8HQ4HM>

In the United States, data pointed to a surprisingly strong April rise in home prices, boosting U.S. housing shares. The mildly encouraging figures on housing were mitigated by data signaling a deterioration in consumer confidence, which stoked concerns about slowing U.S. growth.

Anxiety over a global economic slowdown underpinned by the fiscal troubles in the euro zone led analysts to conclude any bounce in stock prices could be short-lived.

"This is a classic exhaustion rebound. The selling intensity was pretty high yesterday, and technically, we were due for a short-term rebound," said James Dailey, portfolio manager of TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

"But these gains are really unsustainable. I think we have entered the bear market cycle already, and these (gains) could disappear any minute."

Investors pared their safe-haven holdings in gold as well as U.S. and German government debt.

They bought Brent oil futures, which rose above $93 a barrel on a strike in Norway that threatened North Sea supply, expectations of falling U.S. crude inventory and rising tension over Syria. <O/R>

At the close, the Dow Jones industrial average .DJI edged up 32.47 points, or 0.26 percent, to 12,535.13. The S&P 500 Index .SPX gained 6.32 points, or 0.48 percent, to 1,320.04. The Nasdaq Composite .IXIC rose 17.90 points, or 0.63 percent, to 2,854.06. .N

The FTSEurofirst 300 index .FTEU3 of Europe's top shares closed up 0.02 percent at 986.63 points, wiping out an earlier 0.4 percent rise. .EU

In Tokyo, the Nikkei index .N225 finished down 0.8 percent at 8,663.99. .T

MSCI's world equity index .MIWD00000PUS was up 0.33 percent at 1,192.32, snapping a three-session losing streak.

In the currency market, the euro fell to $1.2440, its lowest level in more than two weeks against the dollar, before paring its decline to end down 0.09 percent at $1.2491. <FRX/>

The dollar firmed against other major currencies as the euro weakened. The dollar index .DXY was down 0.16 percent at 82.361, erasing a modest rise.

"The euro is going to trend lower, but I don't think you're going to see any large moves ahead of the summit," said John Doyle, senior strategist at Tempus Consulting in Washington.

"I don't think, realistically, that anyone is expecting a magic bullet to come out of this meeting and to fix all the underlying problems in Europe."

Spain's formal request on Monday for European aid along with a downgrade by Moody's of 28 of its banks, plus news that Cyprus had become the fifth euro zone member to request a bailout, curbed the appetite for riskier assets.

German Chancellor Angela Merkel was quoted as telling a meeting of one of the parties in her coalition on Tuesday that she does not think Europe will have shared total debt liability in her lifetime.

Finance ministers of the four biggest euro zone economies were holding last-minute talks in Paris on Tuesday to try to narrow differences on how to manage the crisis.

The summit will discuss a plan to create a euro zone treasury which could issue regionally backed bonds as the final stage of a fiscal union but with a recognition that this may take years to implement.

In commodity markets, Brent crude oil for August delivery settled up $2.01 or 2.21 percent at $93.02 a barrel. U.S. oil futures settled up 15 cents or 0.19 percent at $78.36 a barrel, extending earlier losses. <O/R>

Gold fell 0.8 percent at $1,571.34 an ounce while copper closed up $25 or 0.3 percent at $7,359.15 per ton.

In bond trading, benchmark U.S. Treasury notes were down 9/32 in price at 101-2/32 for a yield of 1.63 percent, up 3 basis points from Monday's close. German Bund futures were down 62 basis points or 0.4 percent at 141.53. <US/> <GVD/EUR>

(Additional reporting by Chuck Mikolajczak and Wanfeng Zhou in New York; Richard Hubbard and Jessica Mortimer in London; Editing by Chizu Nomiyama and Andrew Hay)

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Comments (2)
The US is heading toward a new recession. The EU summit will not change the EU structure to one similar to the US with an EU federal reserve bank and an EU federal government that can stimulate growth. US banks continue to hold $2 trillion in bad US debts; they bought $500 billion in EU bank bonds; and they advised their customers to buy $1 trillion in the same bonds.

Deteriorating consumer sentiment is not to blame because US household wealth has plunged 40%. Wages are down 7.7%. That is reality, not sentiment. Unemployment remains high and benefits are ending. Gasoline prices have remained high because of endless international crises. Summer has arrived after winter reached 90 degrees and spring reached 117 degrees. Sunday was 102, Monday was 105, and summer lasts until September 22. The power companies warn that power use may reach maximum usage. Air conditioning companies make daily calls. People drive two blocks to stores because it is too hot to walk, and they lock their doors and leave the motors running to keep the cars cool. Americans spend all of their spare money on food, gasoline, and air conditioning. They cannot afford to drive the US economy.

There are small crises like tornadoes, hurricanes, and floods. The warm winter and spring have brought insect infestations of crickets, ants, termites, and mosquitoes. The latter has brought back West Nile Virus. In addition, there are the fires that burn resources, homes, vehicles, and businesses, and they waste millions of man hours in unproductive work. These are all additional costs that prevent the driving of the US economy into recovery.

The drought and heat give additional problems. Water rationing is in effect in growing numbers of cities, but the worst problem for the US is food. Agriculture is dying in many parts of the US, and livestock herds are being sold because feed costs are too high. Fishing is affected by oil spills, algae blooms, and excessive carbon dioxide absorbtion because fish can’t breathe carbon dioxide. China chose to deal with global warming with a massive irrigation project from 2001 to 2020 or 2025 that would allow China to feed 3 or 4 billion people with grain from irrigated fields and fish from reservoirs and canals. In 2011, China reached its grain target for 2020, 9 years early. US grocery stores have canned fish and frozen vegetables from China, so the US has a new source for its trade deficit with China. As the US, Mexico, Africa, the Middle East, India, and Australia become polluted deserts, China continues plans to develop water, agriculture, and aquaculture. For the US in 2012, it is one more cost and one more lost commercial opportunity that is leading the US into another recession.

Jun 26, 2012 1:15pm EDT  --  Report as abuse
tdiam64629 wrote:
They should abandon the Euro. These summits are a bigger joke than Obama meeting Congress and expecting any agreement. And asking Germany to bailout everyone else is going to happen. It is like the rest of the American League in basebasll to ask the Yankees for revenue sharing. Why not, the Yankees have the most revenue. Give us some.

Jun 26, 2012 1:38pm EDT  --  Report as abuse
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