* World shares gain 1.6 pct on hopes for fiscal cliff
* Oil nears $110 a barrel as Middle East tension adds
* Dollar touches a 7-month high vs yen
By Ryan Vlastelica
NEW YORK, Nov 19 World share markets and
commodities surged in early trading on Monday, recovering some
of the previous week's sharp losses as traders focused on
politicians' comments indicating readiness to compromise to
avoid the U.S. "fiscal cliff."
Wall Street stocks climbed more than 1 percent, extending a
rally that began on Friday, while crude oil was up more than 2
U.S. lawmakers indicated compromises were possible in
negotiations to avert $600 billion in tax increases and spending
cuts due to start in January - the "fiscal cliff" that threatens
to send the U.S. economy back into recession.
Democratic Senator Dick Durbin said on CNN, "What I hear is
a perceptible change in rhetoric from the other side."
Also appearing on CNN, Republican Representative Tom Price
said, "Every member of our caucus appreciates that this fiscal
crisis, this challenge that we have, is ever closer."
Opinion polls show that Republicans would shoulder more of
the blame if the country goes over the fiscal cliff.
MSCI's world equity index jumped 1.6
percent, its best day since Sept. 14, recovering most of last
week's 1.8 percent fall.
"Stocks could rise substantially if U.S. policymakers can
negotiate a 'grand bargain' that credibly addresses long-term
tax, spending, and entitlement reforms," said Jonathan Golub,
strategist at UBS in New York.
The Dow Jones industrial average was up 149.67
points, or 1.19 percent, at 12,737.98. The Standard & Poor's 500
Index was up 20.05 points, or 1.47 percent, at 1,379.93.
The Nasdaq Composite Index was up 40.20 points, or 1.41
percent, at 2,893.33.
Optimism in Europe over the prospects of a deal this week to
release much-needed aid for Greece also lent support.
European officials are expected to discuss a two-year
funding plan for Athens at a meeting on Tuesday, which would
postpone any longer-term solution until after a September 2013
German general election.
European Central Bank policymaker Joerg Asmussen said at the
weekend that the ministers were likely to agree the deal and
leave resolution of a longer-term debt stabilization plan for
Greece, at the heart of a disagreement with the IMF, until
The euro rose 0.37 percent to a high of $1.2787,
well above the two-month low of $1.2661 hit last week and near
the top end of its recent range, suggesting the foreign exchange
market expects an agreement on Greece.
"This message from the ECB would tell me that, yes, what we
are heading to this week is an agreement that would keep Greece
out of trouble for the next year or so," said Gilles Moec,
senior European economist at Deutsche Bank.
European share markets rebounded from last week's lows,
mainly on the growing optimism over the U.S. political
The FTSE Eurofirst 300 index of top European shares
soared 1.9 percent at 1,076.03, led by sectors tied to the pace
of economic growth. Banks climbed 2.9 percent, with U.S.
shares of Barclays up 4.7 percent to $15.68.
In the region's main centers, London's FTSE 100, was
up 1.8 percent, while Frankfurt's DAX and Paris's
CAC-40 rose 2.4 percent.
Safe haven bond markets reflected the stronger risk
appetite, with the 10-year U.S. Treasury down 11/32 to yield
The 10-year German government bond fell and its yield
rose to 1.362 percent from 1.326 percent on
Friday. Traders said there was room for yields to rise if euro
zone policymakers reached an agreement at their meeting on
In the currency markets, the dollar briefly extended its
gains against the yen on expectations a new Japanese government
will push the central bank into taking aggressive monetary
stimulus measures to boost growth after next month's elections.
The greenback was flat against the yen at 81.24.
Earlier, it rose to its highest level since April 25.
The Bank of Japan began a two-day meeting on Monday but was
not expected to take any new policy steps before the Dec. 16
The rising hopes of a deal on closing the U.S. budget gap,
which had clouded the outlook for global growth, spread through
commodity markets, lifting oil, copper and gold.
Copper rallied 1.9 percent to $7,752 a ton on the London
Metal Exchange, and gold rose $16.3 to $1,729.91
A drop in the dollar index, which had eased from a
two-month high hit on Friday, added to demand by making
commodities priced in the greenback more affordable for buyers
holding other currencies.
Brent crude rose to almost $110 a barrel as the escalating
violence between Israel and the Palestinians fueled concern
about supplies from the Middle East.
Investors fear the conflict may draw in other countries and
possibly disrupt energy exports from the region, which supplies
more than a third of the world's crude.
Brent crude for January delivery was up 2.3 percent
and U.S. crude futures added 2.4 percent.