GLOBAL MARKETS-Stocks rally on Bernanke, economic data; euro up

Wed Feb 27, 2013 3:37pm EST

* Euro boosted by solid Italy debt sale after election
    * S&P 500 up more than 1 pct; MSCI world equity index up 1
pct
    * European and Italian stocks bounce back
    * U.S. durable goods minus transportation up


    By Caroline Valetkevitch
    NEW YORK, Feb 27 (Reuters) - U.S. stocks rallied for a
second straight day on Wednesday as Federal Reserve Chairman Ben
Bernanke reaffirmed his strong support for the Fed's stimulus
efforts, while the euro climbed after solid demand at an auction
of Italian government debt.
    Data on U.S. housing and durable goods added to bullish
sentiment in stocks, with the U.S. benchmark S&P 500 rallying
more than 1 percent and an index of world stocks up 1 percent.
    Bernanke's comments came on his second day of testimony in
Congress. His defense on Tuesday of the Fed's monetary stimulus,
which eased worries over a possible early retreat from its
policy of bond purchases after last week's release of Fed
meeting minutes, helped U.S. stocks rebound from their worst
decline since November. 
    On Wednesday, he said the U.S. jobless rate is unlikely to
reach more normal levels for several years. 
    "It doesn't matter what the Fed minutes tell you, he is
going to keep refilling the punch bowl until we get unemployment
down below 6 percent," said Keith Bliss, senior vice president
at Cuttone & Co in New York. 
    Some markets also were relieved as Italy sold all 6.5
billion euros of the 5- and 10-year bonds offered to investors.
It could have chosen to sell less, though it paid more than half
a percentage point more in interest than before its election.
    Two days after the vote offered no party a majority, markets
had been concerned about the country's finances. 
    Investors fear the strength of the vote for anti-austerity
parties in Italy could weaken efforts to reform public finances
and labor laws and damage the euro zone's efforts to resolve its
three-year old debt crisis.
    The euro rose for the first time in three sessions,
climbing to $1.3125, up 0.5 percent on the day. 
    The MSCI world equity index was up 0.8
percent, and the pan-European FTSEurofirst 300 index 
ended 0.9 percent higher.
    The European index was helped by gains in Italy's benchmark
index, which jumped 1.8 percent after falling 4.9
percent on Tuesday. A rebound in the benchmark index of Spain,
another country that has been a prime worry in the euro zone,
also helped. 
    On Wall Street, the Dow Jones industrial average was
up 177.72 points, or 1.28 percent, at 14,077.85. The Standard &
Poor's 500 Index was up 20.92 points, or 1.40 percent, at
1,517.86. The Nasdaq Composite Index was up 47.43
points, or 1.52 percent, at 3,177.08. 
    In response to the financial crisis and deep recession of
2007-2009, the Fed has kept official borrowing costs at
effectively zero, and it bought more than $2.5 trillion in
mortgage and Treasury securities to keep long-term rates low.  
    U.S. economic data added to positive sentiment. The January
durable goods orders excluding transportation increased 1.9
percent, the largest gain since December 2011, and well above
economists' expectations of a 0.2 percent gain. Another report
on Wednesday showed that contracts to buy previously owned homes
approached a near three-year high last month. 
 
    Italian bonds and those of other euro zone countries whose
creditworthiness is a focus of concern were helped by Italy's
debt sale. Safe-haven German bonds fell before
recouping losses.
    Italian 10-year yields fell 7 basis points to
4.83 percent in the secondary market while German Bund futures
were up 27 basis points on the day at 145.09 after the sale.
    Italy and Spain's need to change the shape of their
economies, boost growth and reduce debt have been at the heart
of the euro zone's troubles for over a year. Fears have eased
substantially since the European Central Bank said it would do
whatever was necessary to prevent a break-up of the euro.
    "The uncertainty in Italy does not bode well for the Italian
economy which is going through a tough recession as it is. It
does not need yet another stumbling block while trying to
recover," said Sean Cotton, vice president and foreign exchange
adviser at Bank of the West in San Ramon, California. 
            
    GOLD, BRENT RETREAT
    In the precious metals market, gold prices fell 1 percent,
extending losses as the  Wall Street rally prompted bullion
investors to take profits after the previous session's gains. 
    Spot gold was down 1 percent at $1,596.95 an ounce.
    Brent crude oil futures for April delivery fell 84
cents to settle at $111.87 a barrel, while U.S. crude oil
futures rose by 13 cents to settle at $92.76. Investors
weighed expectations that the Fed's stimulus program will be
maintained against a sixth straight weekly rise in U.S. crude
oil stockpiles. 
    The safe-haven yen fell against the dollar.
    The U.S. dollar last traded at 92.31 yen, up 0.3
percent. The euro stood at 121.14 yen, up 0.8 percent
on the day.   
   The yen has been one of the worst performing major currencies
so far this year as investors bet on more aggressive policies
from the Bank of Japan to beat deflation, and positioned for
more monetary stimulus.