Euro rises on ECB talk, earnings buoy Dow
NEW YORK (Reuters) - The euro rose on Wednesday after suggestions that European policymakers will consider new ways to tackle the region's debt crisis, while U.S. earnings supported the Dow.
Caterpillar (CAT.N) and Boeing (BA.N) raised 2012 profit forecasts while chipmaker Broadcom (BRCM.O) predicted quarterly revenue growth, helping to offset news of an unexpected drop in new U.S. home sales.
Meanwhile, Apple Inc (AAPL.O), the world's most valuable publicly traded company, fell 3.8 percent to $578.35 after it posted a rare miss in revenue late on Tuesday.
"I'm encouraged investors are taking the Apple news pretty well," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
"The stock is up more than 40 percent for the year so seems like a 3 percent drop is barely a speed bump."
Ablin said the news that Dow components Caterpillar and Boeing raised their outlooks "is a huge positive for the market."
The Dow Jones industrial average .DJI was up 49.87 points, or 0.40 percent, at 12,667.19. The Standard & Poor's 500 Index .SPX was down 1.55 points, or 0.12 percent, at 1,336.76. The Nasdaq Composite Index .IXIC was down 12.11 points, or 0.42 percent, at 2,850.88
The euro rose 0.85 percent to $1.2161, although the outlook remains weak and it is only just above a two-year low of $1.2042 hit Tuesday.
European Central Bank 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 grasping for any positive news," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, D.C. "It adds to the already somewhat improved tone. Whether or not it lasts is the question."
Market support from central banks has been expected for weeks as economic data sags globally. Weak readings on Britain's gross domestic product and on a German business sentiment survey added to worries about slowing growth.
FED COULD ACT SOON
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.
"Right now in my view it's still Fed rhetoric, but enough to keep investors confident to take risk. I don't necessarily see tangible action. I think the Fed is afraid to take action, fearful the market could shrug it off," Ablin said.
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.
The pan-European FTSEurofirst 300 .FTEU3 index dipped 0.07 percent after a weak U.S. reading on new home sales. U.S. dollar-denominated Nikkei futures rose 0.4 percent.
The MSCI world equity index .MIWD00000PUS edged 0.2 percent higher but has fallen more than 2 percent so far this week as concerns about the impact of Europe's problems on growth spread across the world.
Further supporting the euro, 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 gains in the euro came despite the weak economic data from Germany and the UK, which reinforced the view that even Europe'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. .
British economic output also shrank much more than expected in the second quarter hit by the euro zone debt crisis and government austerity, official data showed.
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 5/32, with the yield at 1.4059 percent after earlier rising as high as 1.44 percent. The yield hit an all-time low on Tuesday.
Gold futures rose more than 2 percent as expectations of U.S. and European monetary stimulus strengthened its appeal as an inflation hedge. Gold futures were last up 2 percent at $1,608 an ounce.
(Reporting by Rodrigo Campos; Additional reporting Nick Olivari; Editing by Kenneth Barry)
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