Global stocks end higher, dollar briefly touches three-year high

NEW YORK Mon Jul 8, 2013 5:38pm EDT

1 of 6. Traders work on the floor of the New York Stock Exchange shortly after the opening of the markets in New York July 3, 2013.

Credit: Reuters/Lucas Jackson

NEW YORK (Reuters) - Global stock indexes climbed on Monday as the upcoming U.S. earnings season added to investor optimism after last week's robust U.S. jobs data, while the dollar edged off three-year highs against major currencies.

Oil prices declined after rising sharply on unrest in Egypt, which stoked concerns about global supplies.

The upbeat U.S. jobs data on Friday reassured investors the U.S. economy was still strengthening but also fueled some concern the Federal Reserve could soon start reducing its $85 billion a month stimulus.

The improved view of the economy, combined with investors turning their attention to earnings season with Alcoa (AA.N) reporting after the close, helped send equities higher, said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

"There's really not a reason to sell stocks today," Hellwig said. "There's a high level of comfort with the earnings season and with the strong job market."

The majority of S&P 500 companies tend to beat analysts' expectations for earnings.

MSCI's global share index .MIWD00000PUS was up 0.4 percent. Europe's broad FTSEurofirst 300 .FTEU3 stock index ended 1.4 percent higher.

On Wall Street, the Dow Jones industrial average .DJI was up 88.85 points, or 0.59 percent, at 15,224.69. The Standard & Poor's 500 Index .SPX was up 8.57 points, or 0.53 percent, at 1,640.46. The Nasdaq Composite Index .IXIC was up 5.45 points, or 0.16 percent, at 3,484.83.

The dollar index .DXY, which measures the value of the greenback versus a basket of six major currencies, fell 0.3 percent to 84.204, having hit 84.588, its strongest since July 2010.

Expectations the U.S. economic recovery is leading the rest of the world and that the Fed will reduce its bond-buying have sparked a nearly 5 percent rally in the dollar since mid-June, prompting some traders to say the move had been too fast.

Focus is shifting to Wednesday's release of the minutes from the Fed's June policy meeting. A Reuters poll of firms that deal directly with the Fed now sees the reduction beginning in September.

"Our conviction is strong that the dollar will embark on a structural ascent, against a broad range of currencies," said Stephen Jen, a managing partner at London-based hedge fund SLJ Macro Partners.

BOND PRICES BOUND BACK

U.S. Treasuries prices climbed on buying by bargain-minded investors, helping to bring benchmark yields down from near two-year highs.

A Reuters poll conducted after the release of Friday's government payrolls data - which showed U.S. employers added 195,000 jobs in June - found more than half of the major Wall Street bond firms surveyed expected the Fed would reduce its $85 billion monthly purchases of Treasuries and mortgage-backed securities in September.

The 10-year Treasury note last traded 26/32 higher in price to yield 2.638 percent.

"Today we are trying to find a range before this week's supply. Some people are thinking maybe Friday was overdone," said Thomas Roth, executive director of U.S. government bond trading at Mitsubishi UFJ Securities USA in New York.

The divergence between the United States and other major economies is clear in bond markets, with 10-year Treasury yields spiking 23 basis points on Friday to around 2.75 percent, highs last seen in August 2011. The spread between Treasury and bund yields gapped to the widest since 2006.

The U.S. Treasury Department will sell $32 billion of three-year notes on Tuesday; $21 billion of 10-year notes on Wednesday and $13 billion of 30-year bonds on Thursday.

BRENT DECLINES

Brent crude oil fell as news of the returns of a Libyan oilfield and an Iraqi pipeline eased concerns about global oil supplies after unrest in Egypt. Libya's major Sharara oilfield will resume operations after an agreement was reached with the armed group that shut it down last month, a senior Libyan oil source said on Monday.

Brent crude, the European benchmark, fell 29 cents to settle at $107.43 a barrel, after hitting $108.04, the highest since April 4. U.S. light crude was down 8 cents at $103.14, after earlier touching a new 14-month high of $104.12.

"The market is a bit less concerned about a major disruption in Egypt, and was probably overbought a little bit going into the holiday weekend," said Phil Flynn, energy analyst at Price Futures Group.

Gold rose as the rally in the dollar paused and as investors found value following a two-day slide. Spot gold rose to a session high of $1,238.30 an ounce.

(Additional reporting by Wanfeng Zhou, Leah Schnurr, Anna Louie Sussman and Richard Leong in New York; editing by Ruth Pitchford, Ron Askew, Dan Grebler, Andrew Hay)