GLOBAL MARKETS-German data, U.S. fiscal hope buoy shares, euro

Tue Dec 11, 2012 2:46pm EST

* European shares hit 18-month high; German confidence jumps
    * Wall Street rises 1 pct as fiscal talks quicken
    * Fed expected to announce new Treasury securities purchases
    * Oil prices tick up on Egypt, Syria tensions

    By Wanfeng Zhou
    NEW YORK, Dec 11 (Reuters) - Global shares rose to an almost
two-month high and the euro gained versus the dollar on Tuesday
after German investor sentiment improved sharply in December and
as the pace of talks in Washington to avoid the "fiscal cliff"
quickened.
    The dollar weakened as investors steered clear of the U.S.
currency because of a two-day Federal Reserve policy meeting
that will end on Wednesday. U.S. Treasury prices fell as gains
in stocks eroded safe-haven demand for government debt.
    Major U.S. stock indexes rallied around 1 percent, pushing
the S&P 500 to its best levels since mid-October and erasing all
the loss suffered in the sell-off following the U.S. elections.
    Morale among German analysts and investors improved sharply
in December, according to a monthly poll by the ZEW think-tank.
Its sentiment index jumped to 6.9 against expectations of -12.0,
fanning hopes that Germany, Europe's largest economy, will avoid
recession this winter. 
    Traders voiced cautious optimism as U.S. politicians held
more talks over the "fiscal cliff" of steep tax increases and
spending cuts set for the end of the year. Representatives from
both sides cautioned that an agreement remains uncertain.
 
    "I guess in our own dysfunctional way, there is progress,"
said Frank Davis, director of sales and trading at LEK
Securities in New York.
    "Since conversations are occurring it clarifies at least
they are taking some action. My personal gut is they'll jostle
this into the holiday week and try to do a last-minute push."  
    The lack of demonstrable progress has kept investors from
making aggressive bets in recent weeks. But stocks have steadily
marched higher on thin volume. The S&P 500 surpassed 1,433.38 on
Tuesday, retracing the losses of the first seven sessions after
President Barack Obama's re-election.
    The Dow Jones industrial average gained 108.19
points, or 0.82 percent, to 13,278.07. The Standard & Poor's 500
Index rose 12.66 points, or 0.89 percent, to 1,431.21.
The Nasdaq Composite Index added 42.15 points, or 1.41
percent, to 3,029.11.
    The Nasdaq was lifted by a 3 percent rise in Apple Inc
 shares, following a slump in the shares last week as
investors took profits ahead of a possible rise in capital gains
taxes.
    The FTSEurofirst 300 index closed up 0.4 percent at
1,138.85 points, its highest finish since mid-2011. The MSCI
global stock index hit its highest level since
Oct. 19 and was last up 0.7 percent at 337.39 points.
    
    FED EASING
    The U.S. central bank is expected to announce a new round of
Treasury securities purchases at the end of its two-day meeting
on Wednesday, according to a Reuters poll. The program would
replace its "Operation Twist" stimulus, which expires at the end
of the year. 
    Many economists believe the Fed will announce monthly bond
purchases of $45 billion, although some think it could be more.
    "We anticipate the Fed will announce Treasury purchases, and
as that depresses yields, it will have a negative impact on the
dollar and that supports the euro," said Jane Foley, senior
currency strategist at Rabobank.
    Expectations of more easing drove the dollar index 
down 0.3 percent and pushed the Canadian dollar to a
two-month high, while the New Zealand dollar hit a nine-month
high.
    The euro rose 0.5 percent to $1.3009, while against
the yen the dollar was up 0.3 percent at 82.54 yen.
    Markets had been rattled on Monday by Italian Prime Minister
Mario Monti's announcement he would step down some weeks early.
But the upbeat German data helped lift shares and the euro from
their gloom.
 
    Benchmark 10-year Treasury notes were trading 11/32 lower in
price to yield 1.6558 percent, the highest in over
two weeks. Prices held losses after an auction of $32 billion of
three-year notes saw lukewarm bidding, as a record low yield
perhaps deterred some potential buyers.
    In the oil market, Brent crude rose 34 cents to
$107.67 a barrel after OPEC said its production declined in
November, while the weaker dollar and Middle East unrest also
supported prices. 
    U.S. crude fell 1 cent to $85.55.
    Gold was steady near $1,710 an ounce, with more U.S.
stimulus expected to support gold's appeal as a hedge against
inflation.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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