GLOBAL MARKETS-Stocks, long bond yields and oil up on debt deal hopes
* Wall St indexes up strongly; European shares also gain
* Dollar up against yen, euro steadies
* Gold extends Wednesday's losses
* Oil notches biggest gain since Aug 27
By Barani Krishnan
NEW YORK, Oct 10 (Reuters) - U.S. stocks were headed for their best day since the start of the year and yields on longer-dated Treasuries rose on Thursday after President Barack Obama agreed to consider a proposal from Republican lawmakers to avert a historic debt default.
The dollar hit a 2-week high against major currencies and benchmark crude oil had its biggest gain in 6 weeks.
Obama is willing to sign a "clean" bill to raise the U.S. debt ceiling - one that does not include policy demands - but isn't clear yet what House Republicans are proposing, White House spokesman Jay Carney told reporters.
Earlier, another White House official, speaking on conditions of anonymity, said Obama was willing to look at a proposal by congressional Republicans to extend the debt ceiling for six weeks, but insisted that lawmakers also end the 10-day government shutdown. The official said the plan was presented by House of Representatives Speaker John Boehner to fellow House Republicans ahead of a meeting with Obama.
"We haven't seen a bill yet," Carney said, adding that Obama was "happy that cooler heads at least seem to be prevailing in the House".
Wall Street's three key stock indexes - the S&P 500, the Dow and Nasdaq - rose more than 1.5 percent each, heading for their best day since January 2, when markets began trading for the year.
U.S. Treasuries yields briefly rose to their highest levels in more than two weeks on Thursday amid talk Congress could agree to raise the debt ceiling, but the lower prices and higher yields drew buyers to the Treasury's $13 billion 30-year bond auction and lifted prices from the day's lows.
The Dow Jones industrial average was up 237.81 points, or 1.61 percent, at 15,040.79. The Standard & Poor's 500 Index was up 27.92 points, or 1.69 percent, at 1,684.32. The Nasdaq Composite Index was up 73.46 points, or 2.00 percent, at 3,751.24.
"Now we just wait, move up and down one percentage point and trade specific stocks on earnings until we get some kind of definitive outcome from Washington," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.
"Today is reversing excess fear. I think the 14 day (moving average) may actually be a difficult resistance level to break."
The market's closely-watched VIX "fear index" plunged more than 15 percent to 16.65, near levels prior to the U.S. government shutdown.
The 45-country MSCI stock index was up 1.4 percent, on track to its strongest showing in 3 months.
European stocks also rallied, closing up 1.7 percent for the best performance in a month. On Wednesday, European equities hit a 1-month low.
The number of Americans filing new claims for unemployment benefits hit a six-month high last week, pressured by the U.S. government shutdown.
Investors expect Republicans and Democrats to cut a deal to raise the debt ceiling before next Thursday's deadline, though each day that passes without an agreement tests their nerves. It is unclear how long a short-term deal would be in effect, but any move to raise the country's $16.7 trillion borrowing limit would at least stave off a possible default.
The U.S. dollar index rose 0.1 percent against a basket of currencies. The euro was flat, recovering from early pressure after French and Italian industrial production data fell short of market expectations.
Against the yen, the dollar rallied 0.8 percent to 98.11 , up from a two-month low of 96.55 yen hit on Tuesday. Traders said the dollar rebounded after finding strong support at its 200-day moving average, currently at 96.82.
NEAR-TERM FUNDING PRESSURE DOWN
Strains on short-term U.S. interest rates and funding markets eased after running up in the past two sessions.
The current one-month Treasury bill yields traded at 0.26 percent, down from 0.29 percent earlier in the day and Tuesday's five-year high of 0.36 percent.
The benchmark 10-year U.S. Treasury note was down 15/32, its yield at 2.7145 percent.
Thirty-year bonds erased an early loss and were up 1/32 after a new sale of $13 billion on Thursday. The yield for the issue was 3.74 percent.
There were few signs of nerves on European bond markets, however, with German government bonds, typically favored by risk-sensitive investors, edging lower and higher-yielding euro zone periphery debt faring better.
As the dollar regained its footing, gold eased 0.7 percent to below $1,300 an ounce, extending Wednesday's near 1 percent decline.
Crude oil rallied after the potential for the debt deal in Congress combined with news about the Libyan prime minister's brief detention by gunmen. Benchmark Brent crude out of Europe's North Sea closed up 2.5 percent at $111.80 per barrel, its biggest gain since August 27.
- Exclusive: Secret contract tied NSA and security industry pioneer |
- U.S. aircraft hit by gunfire in South Sudan as conflict worsens
- With Fed out of the way, what's next on Wall Street?
- Analysis: Lost Brazil order raises threat to Boeing fighter jets
- Four men arrested in deadly N.J. shopping mall carjacking