GLOBAL MARKETS-Stocks climb on Bernanke, U.S. data; euro gains

Wed Feb 27, 2013 5:23pm EST

* S&P 500 posts best day since Jan. 2; MSCI world equity
index up 0.9 pct
    * Euro boosted by solid Italy debt sale after election
    * U.S. capital goods orders ex-defense up 6.3 pct


    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 commitment to the Fed's stimulus
efforts, while the euro climbed after solid demand at an auction
of Italian government debt.
    Robust data on U.S. housing and business spending plans
added to bullish sentiment in stocks. The U.S. benchmark S&P 500
posted its best day in nearly two months, while an index of
world stocks rose 0.9 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 Italian 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 auction's demand bolstered the euro, which last traded
at $1.3145, up 0.6 percent on the day. The euro stood at
121.12 yen, up 0.8 percent. 
   On Wall Street, the Dow Jones industrial average rose
175.24 points, or 1.26 percent, to end at 14,075.37. The
Standard & Poor's 500 Index was up 19.05 points, or 1.27
percent, at 1,515.99, its best daily percentage gain since Jan.
2. The Nasdaq Composite Index was up 32.61 points, or
1.04 percent, at 3,162.26. 
    U.S. economic data added to positive sentiment. A gauge of
planned U.S. business spending recorded its largest increase in
just over a year in January. Orders for capital goods, excluding
defense-related items and aircraft, a closely watched proxy for
business spending plans, jumped 6.3 percent, the biggest gain
since December 2011. 
    Another report on Wednesday showed that contracts to buy
previously owned homes approached a near three-year high last
month.
    
    The MSCI world equity index was up 0.9
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.
    
    U.S. BONDS SLIP
    The commitment to a stimulative monetary policy reiterated
by Bernanke sent safe-haven U.S. bonds lower.
    In response to the financial crisis and deep recession of
2007-2009, the Fed has kept official borrowing costs at
effectively zero, and it has bought more than $2.5 trillion in
mortgage and Treasury securities to keep long-term rates low.  
    Benchmark 10-year Treasuries were last down 5/32
in price, their yields at 1.90 percent compared with 1.89
percent late on Tuesday.
    "The basic story today was a return to risk on with a sharp
increase in equities pulling the bid from Treasuries," said John
Canavan, market analyst at Stone & McCarthy Research Associates
in Princeton, New Jersey. 

    GOLD, BRENT RETREAT
    In the precious metals market, gold prices fell as the Wall
Street rally prompted bullion investors to take profits after
the previous session's gains.
    Spot gold was down 1.1 percent to $1,595.71 an ounce.
    Brent crude oil futures for April delivery fell 84
cents to settle at $111.87 a barrel. U.S. crude oil futures
 rose by 13 cents to settle at $92.76. Data showed a sixth
straight weekly rise in U.S. crude oil stockpiles.
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