GLOBAL MARKETS-Stocks, bonds rise on easing fear of early Fed exit

Thu Jun 27, 2013 2:43pm EDT

* Wall St extends gains for third day
    * Fed bond buying could be more aggressive than new timeline
- Dudley
    * Precious metals rebound, oil extends gains


    By Angela Moon
    NEW YORK, June 27 (Reuters) - Global equity markets and
bonds rose on Thursday, showing further signs of stabilizing
from a dramatic selloff as concerns receded that the Federal
Reserve would begin to unwind its stimulus efforts earlier than
expected.
    U.S. Treasuries, which were hit the hardest by Fed Chairman
Ben Bernanke's comments last week about when the U.S. central
bank would begin paring back its huge bond purchase program,
showed more signs of recovery with prices rising further after a
sale of seven-year government debt.
    Wall Street extended its gains for a third session after a
Fed official reiterated that any change in monetary policy will
depend on data and not the calendar.
    A number of upbeat U.S. economic reports on the housing
sector and consumer spending further eased worries over whether
the world's biggest economy could withstand the winding down of
the Fed's monetary stimulus. 
    New York Fed President William Dudley stressed in a speech
that the newly adopted timeline for reducing the pace of bond
buying depends not on calendar dates but on the economic
outlook, which remains quite unclear. 
    "The Fed had to be shocked at how much of a move Bernanke's
testimony generated ... so now it is trying to alter
expectations," said Nick Sargen, chief investment officer at
Fort Washington Investment Advisors in Cincinnati.
    Equities have been volatile ever since Bernanke said the
Fed's $85 billion a month bond-buying program, credited with
fueling the market's 13 percent jump in 2013, would be reined in
earlier than expected if economic conditions improve. The
benchmark S&P 500 dropped as much as 4.8 percent in the
days following a June 19 statement from Fed policy-makers.
    In Treasuries, the benchmark 10-year note rose
20/32 in price to yield 2.468 percent, compared to a price gain
of 12/32 shortly before the seven-year debt sale.
    The 30-year bond rose 28/32 in price to yield
3.532 percent after the auction, in which the Treasury sold $29
billion of seven-year notes at a high yield of 1.932 percent,
the highest yield since July 2011.
    
    MARKETS RECOVER
    European shares ended higher, with the FTSEurofirst 300
 index of top European shares rallying for a third
straight day to close 0.7 percent higher at 1,157.42.
    The index, still down nearly 8 percent since late May,
managed to cross back above a major resistance level
representing the index's 200-day moving average, sending a
positive technical signal.
    MSCI's world share index rose 1 percent
after touching its highest in a week.
    The Dow Jones industrial average was up 106.90
points, or 0.72 percent, at 15,017.04. The Standard & Poor's 500
Index  was up 10.83 points, or 0.68 percent, at 1,614.09.
The Nasdaq Composite Index  was up 24.28 points, or 0.72
percent, at 3,400.50. 
    Since the sharp decline last week, the S&P 500 has rebounded
to climb 1.9 percent over the past two sessions as economic data
and comments from Fed officials quelled fears of an
earlier-than-expected pullback of monetary stimulus to spur the
economy.
    With the yield on benchmark 10-year U.S. government debt
appearing to have stabilized at around 2.5 percent, euro zone
bonds from Germany to Greece were able to claw back some of the
ground lost during the recent global selloff. 
    Reflecting the recent rise in yields generally over the last
few weeks, Italy paid its highest rate since March at a 5
billion euro auction of 10- and 5- year debt. But healthy demand
boosted its bonds to top the list of euro zone periphery
performers. 
    Markets also focused on a deal hammered out by European
authorities overnight designed to shift the burden of paying for
bank bailouts away from taxpayers, although economists' opinions
on the deal were mixed. 
    In other assets, crude oil futures rose for a fourth
straight session on Thursday, gaining over $1 a barrel, while
gold reversed earlier gains to trade down. Spot gold was
down $21.1 to $1,204.16 an ounce.
    Brent crude for August delivery broke through its
50-day moving average, rising $1.36 to $103.02 a barrel. 
    The dollar last traded up 0.7 percent at 98.39 yen,
edging toward Monday's peak of 98.70 yen. But traders said its
rise could be capped by large sell orders above 98.70 yen.
The euro was near flat at $1.3015, with the low at
$1.2999.
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