GLOBAL MARKETS-Bank stocks climb, bond yields dip after Portuguese bank rescue

Mon Aug 4, 2014 12:28pm EDT

(Adds European market close, quote)
    By Chuck Mikolajczak
    NEW YORK, Aug 4 (Reuters) - Bond prices rallied and European
bank stocks rose on Monday after Portugal devised a plan to
prevent the collapse of one of its biggest lenders. 
    U.S. stocks were little changed at the midpoint of the
session, with the S&P 500 coming off its worst week since
2012, as concerns over higher U.S. interest rates eased
following Friday's U.S. employment report.
    Lisbon on Sunday announced a nearly 5 billion-euro ($6.6
billion) rescue of the country's largest listed bank, Banco
Espirito Santo, preventing it from collapsing and
potentially destabilizing the regional banking sector.
 
    "Fundamentally, earnings season has been OK, but the recent 
pace of increases (in the market) can't continue forever," said
Rick Meckler, president of investment firm LibertyView Capital
Management in Jersey City, New Jersey.
    "Portugal was a net positive," he said, but "we may pause at
this level unless next quarter can produce the kind of top-line
growth associated with a better recovery."
    Portugal's 10-year yield fell to 3.648
percent, down 7 basis points, as investors bought the bonds on
relief after the package was announced. Other European bond
markets also rallied, with yields on Spanish and Italian bonds
moving lower . 
    The FTSEurofirst 300 index of leading shares closed
down 0.19 percent, giving up early gains. Pan-European banking
stocks finished up 0.3 percent, however. 
    The MSCI All-World Index was little changed,
up 0.02 percent.
    U.S. financial shares rose, buoyed by a 2.2 percent
gain in Berkshire Hathaway  after the company
helmed by Warren Buffett said on Friday that second-quarter
profit soared 41 percent. 
    The Dow Jones industrial average was up 11.30 points,
or 0.07 percent, at 16,504.67. The Standard & Poor's 500 Index
 was up 4.43 points, or 0.23 percent, at 1,929.58. The
Nasdaq Composite Index was up 17.69 points, or 0.41
percent, at 4,370.33. 
    
    FED FEARS EASE
    The rate-sensitive U.S. two-year Treasury note yield was
little changed at 0.4683 percent and the 10-year
yield fell to 2.48 percent, declining in tandem with
European yields.
    Bond yields were also capped by Friday's U.S. jobs data for
July, which showed job growth lower than forecast, the
unemployment rate higher than expected and almost no growth at
all in average hourly earnings. 
    A Reuters poll on Friday after the jobs data showed that a
majority of top Wall Street bond firms do not see a rise in U.S.
interest rates before the second half of next year.
 
    Major currencies were little changed on Monday. The euro was
at $1.3413, off last week's eight-month low of $1.3365,
while the dollar stood at 102.49 yen, off Wednesday's
four-month peak of 103.08 yen.
    U.S. crude oil futures were off 5 cents at $97.83 per barrel
, recovering from a six-month low of $97.09 on Friday, and
Brent crude was up 23 cents at $105.07. Spot gold edged
down 0.5 percent at $1,287.30 an ounce.

 (Additional reporting by Rodrigo Campos; Editing by Dan
Grebler)
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