GLOBAL MARKETS-Stocks, euro rise on German data; U.S. fiscal talks eyed

Tue Dec 11, 2012 4:41pm EST

* European shares hit 18-month high; German confidence jumps
    * Wall Street stocks rise 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) - Shares on major markets rose to
near a two-month high and the euro gained versus the U.S. dollar
on Tuesday after German investor sentiment improved sharply in
December and on cautious optimism the United States will avoid a
fiscal crisis.
    The U.S. dollar weakened as investors steered clear of the 
currency before a Federal Reserve policy announcement at the end
of its two-day meeting on Wednesday. U.S. Treasury prices fell
as gains in stocks eroded safe-haven demand for government debt.
    Major U.S. stock indexes advanced, led by gains in
technology shares. The S&P500 index reached its best levels
since mid-October, helping the index end at its best level since
the U.S. presidential election day on Nov. 6. 
    U.S. House of Representatives Speaker John Boehner said he
remained hopeful that both sides would reach a deal to avert the
"fiscal cliff" of tax hikes and spending cuts by the end-of-year
deadline. But Senate Majority Leader Harry Reid said it will be
difficult for Congress to reach agreement before Christmas.
  
    "There's been a real explosion in anxiety over this thing.
Because markets have become the way they are, you've got people
just stepping back," said James Dailey, portfolio manager of
TEAM Asset Strategy Fund in Harrisburg, Pennsylvania. 
   "There's a tremendous absence of liquidity in the market," he
said.
    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 Dow Jones industrial average gained 78.56 points,
or 0.60 percent, to end at 13,248.44. The Standard & Poor's 500
Index rose 9.29 points, or 0.65 percent, to close at
1,427.84. The Nasdaq Composite Index added 35.34 points,
or 1.18 percent, to 3,022.30.
    A 2.2 percent gain to $541.39 in Apple's stock
lifted the Nasdaq index, as the largest U.S. company by market
value rebounded from a week in which investors took profits
before a possible tax rise next year. Prior to Tuesday's
trading, Apple shares had lost 25 percent from an all-time
intraday high hit in September.
    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 last rose 0.6 percent to 337.00 points.    
    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. 
 
    FED EASING
    The U.S. Federal Reserve is expected to announce a new round
of Treasury securities purchases 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 $1.3004, 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 68 cents to
settle at $108.01 a barrel after OPEC said its production
declined in November, while the weaker dollar and Middle East
unrest also supported prices. 
    U.S. crude gained 23 cents to settle at $85.79.
    Gold fell slightly as hopes of a U.S. budget deal
dented the allure of bullion as a safe haven. Investors also
pared back bullish bets as they awaited the Fed announcement.
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