GLOBAL MARKETS-Stocks rise on German backing for ECB bond action
* Merkel's support for ECB action boosts investor sentiment * European shares hit 13-month high, U.S. rallies * Dollar gains vs euro, bond yields up By Herbert Lash NEW YORK, Aug 17 (Reuters) - Global shares and the dollar advanced on Friday after apparent support from German Chancellor Angela Merkel for European Central Bank intervention to calm the euro zone's debt troubles lifted investor sentiment for a second day. A record high for Apple Inc shares boosted U.S. stocks, and traders eyed a breakout to a new four-year peak, just 1/2 percentage point away on the benchmark S&P 500. The CBOE VIX volatility index, seen as a gauge of investor angst on Wall Street, plumbed a five-year low in a probable sign that investors see little risk on the horizon. A key European index hit a 13-month high on speculation euro zone policy-makers might be closer to resolving their differences and working closely to tackle the more than two-year-old debt crisis. In another indication of changing perceptions in Europe, a growing number of economists have concluded that Greece's fate lies inside the euro zone rather than out, as previously thought, according to a Reuters poll. Merkel voiced support for ECB President Mario Draghi's crisis-fighting strategy on Thursday and urged her European partners to move swiftly towards a closer integration of fiscal policies, saying time was running short. The comments, made in Ottawa, came just before markets closed in Europe on Thursday, and provided an extra boost on Friday. "It's all about Europe and Merkel's comments coming out, which appeared to support Draghi," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "Unless the German constitutional court does something outrageous, we may be moving in the right direction here - at least in the short term." The court is expected to deliver a ruling on Sept. 12 on the euro zone's permanent rescue fund, before which Berlin cannot ratify the treaty on it. European shares notched their best weekly run in seven years on Friday. In the U.S., the broad S&P 500 was steady after posting its biggest gain in two weeks on Thursday, buoyed by Merkel's comments and as economic data just beat economists' expectations. A gauge of U.S. consumer sentiment rose to its highest level since May. The Dow Jones industrial average was up 9.26 points, or 0.07 percent, at 13,259.37. The Standard & Poor's 500 Index was up 0.41 points, or 0.03 percent, at 1,415.92. The Nasdaq Composite Index was up 6.36 points, or 0.21 percent, at 3,068.75. The FTSEurofirst 300 index closed up 0.5 percent at 1,110.16 points. Benchmark indexes of Spain and Italy, the two countries at the top of investors' worries over the debt crisis, led regional gains, with Spain's Ibex 35 rising 1.9 percent and Italy's FTSE MIB rising 1.3 percent. World stocks as measured by MSCI's all-country world equity index rose 0.1 percent at 325.42. The euro extended losses versus the dollar after the Thomson Reuters/University of Michigan consumer sentiment survey rose to its highest level in three months in early August as sales at retailers and low mortgage rates spurred Americans to boost their buying plans. The euro fell below $1.23 to hit a global session low of $1.2287. It last traded at $1.2316, down 0.3 percent on the day, according to Reuters data. The dollar hit its highest against the yen since mid-July at 79.57 yen and last traded at 79.54, up 0.3 percent on the day. A preliminary reading of the Thomson Reuters/University of Michigan consumer sentiment survey it hit the highest level since May, at 73.6 from 72.3 in July, topping economists' forecasts for a slight uptick to 72.4. "Consumers are feeling a little better about the current economy, though a little more concerned about the outlook. Current conditions are at the highest level in about three years. That's encouraging," said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis. Yields on U.S. Treasuries edged down from three-month highs but remained at the upper end of a recent trading range as investors lowered bets the Federal Reserve will launch a new bond purchase program when it meets next month. The benchmark 10-year U.S. Treasury note was up 6/32 in price to yield 1.8122 percent. Brent crude oil fell to around $114 after the United States said it was considering the possible release of oil reserves to damp down prices and Israel's president spoke out against a lone Israeli attack on Iran. Brent crude futures for October delivery fell more than 1 percent on talk of possible releases of U.S. strategic petroleum reserves and expectations that North Sea output will rebound after September production is curbed by maintenance. Brent crude was down $1.27 to a low of $114.00 a barrel. U.S. crude oil was up 47 cents at $95.07 a barrel.
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