GLOBAL MARKETS-Shares at 3-mo high on US budget deal hopes

Tue Dec 18, 2012 1:36pm EST

* Global shares hit highest level since September
    * Wall St extends gains on 'fiscal cliff' hopes
    * Euro hits fresh 7-1/2 month high vs U.S. dollar


    By Angela Moon
    NEW YORK, Dec 18 (Reuters) - Global stocks advanced to their
highest levels since September on Tuesday on signs of compromise
in U.S. talks to stop automatic tax hikes and spending cuts that
could hurt the economy next year.
    With confidence rising that lawmakers would avert the
"fiscal cliff," investors shifted funds to stocks and the euro
and pulled away from assets traditionally viewed as safe harbors
like bonds, gold and the U.S. dollar. The euro hit a 7-1/2 month
high against the greenback.
    Wall Street rallied, putting the S&P 500 on track for its
best two-day run in a month, as investors gained confidence that
federal budget talks were progressing, even as significant
differences separated Democrats and Republicans in Washington.
    The gains followed a rally on Monday that lifted the S&P 500
to its highest point in nearly two months. Investors remain
confident Washington will come to an agreement. 
    President Barack Obama's most recent offer makes concessions
to the Republicans on taxes and entitlement spending, but House
Speaker John Boehner said the offer is "not there yet," though
he remains hopeful of an agreement. Senate Democrats have
expressed concern about entitlement cuts, particularly to Social
Security. 
    "As you get more and more clarity and dialogue that there
will be a compromise to avoid a fiscal cliff, I think the
markets are going to rally," said Weston Boone, vice president
of listed trading at Stifel Nicolaus Capital Markets.
    "What's holding this market back - the S&P 500 - from
continuing to reach higher highs is the macro headwinds, and a
lot of that emanates from (Washington) D.C."
    For a second day, banks led the rally on Wall Street.
Goldman Sachs Group was up 3.1 percent and Morgan Stanley
 gained 2.9 percent after Jefferies Group reported
a higher-than-expected adjusted quarterly profit.  
 Jefferies was up 3 percent to $18.79. The S&P
500 Financial Index climbed 1 percent.
    The Dow Jones industrial average was up 103.36
points, or 0.78 percent, at 13,338.75 in afternoon trading. The
Standard & Poor's 500 Index was up 13.46 points, or 0.94
percent, at 1,443.82. The Nasdaq Composite Index was up
37.41 points, or 1.24 percent, at 3,048.02. 
    European shares ended higher, with a key index closing just
a few points below its 2012 high.
    The euro rose to its highest in more than seven months
against the dollar and hovered near a nine-month peak versus the
yen as market players sold the safe-haven dollar.
    Oil prices rose. Front-month Brent crude oil prices 
gained $1.03 to $108.67 a barrel, briefly topping the 14-day
moving average of $108.87 a barrel. U.S. crude oil futures
 gained 76 cents to trade at $87.97 a barrel, breaking
above the 50-day moving average of $87.64 a barrel after testing
that level during Monday's trade.
    The benchmark 10-year U.S. Treasury note was
down 12/32, with the yield at 1.8153 percent. U.S. 30-year
Treasuries bond prices fell a full point. The bonds 
were last down 27/32 in price to yield 2.99 percent, after
rising as high as 3.001 percent. The debt closed on Monday at
yields of 2.95 percent.