December 18, 2012 / 8:25 PM / in 5 years

GLOBAL MARKETS-Shares at 3-month high on hopes for US budget deal

* Global shares hit highest level since September
    * Wall St extends rally on 'fiscal cliff' hopes
    * Euro hits fresh 7-1/2-month high vs U.S. dollar

    By Angela Moon
    NEW YORK, Dec 18 (Reuters) - Global stocks advanced to their
highest levels since September on Tuesday on signs of compromise
in U.S. talks to stop automatic tax hikes and spending cuts that
could hurt the economy next year.
   With confidence rising that lawmakers would avert the
"fiscal cliff," investors shifted funds to stocks and the euro
and pulled away from assets traditionally viewed as safe harbors
like bonds, gold and the U.S. dollar. The euro hit a 7-1/2 month
high against the greenback while gold fell almost 2 percent on
to its lowest since August.
    Wall Street rallied, putting the S&P 500 on track for its
best two-day run in a month, as investors gained confidence that
federal budget talks were progressing, even as significant
differences separated Democrats and Republicans in Washington.
    The gains followed a rally on Monday that lifted the S&P 500
to its highest point in nearly two months. Investors remain
confident Washington will come to an agreement.
    President Barack Obama's most recent offer makes concessions
to the Republicans on taxes and entitlement spending, but House
Speaker John Boehner said the offer is "not there yet," though
he remains hopeful of an agreement. Senate Democrats have
expressed concern about entitlement cuts, particularly to Social
    "Agreement on the 'fiscal cliff' could bring a significant
move away from safe-haven assets, not just here in the U.S., but
globally," said Dan Heckman, senior fixed income strategist at
U.S. Bank Wealth Management in Minneapolis.
    For a second day, banks led the rally on Wall Street.
Goldman Sachs Group was up 2.8 percent and Morgan Stanley
 gained 2.3 percent after Jefferies Group reported
a higher-than-expected adjusted quarterly profit.  
 Jefferies was up 3 percent to $18.79. The S&P
500 Financial Index climbed 1 percent.
    The Dow Jones industrial average was up 84.56 points,
or 0.64 percent, at 13,319.95. The Standard & Poor's 500 Index 
 was up 11.04 points, or 0.77 percent, at 1,441.40. The
Nasdaq Composite Index  was up 29.80 points, or 0.99
percent, at 3,040.40.
    European shares ended higher, with a key index closing just
a few points below its 2012 high.
    The euro surged to its highest level against the dollar in
more than seven months and held close to a nine-month peak
versus the yen on Tuesday.
    The euro was last up 0.5 percent at $1.3228 after
hitting a high of $1.3238, its strongest level since early May.
The dollar index fell to a two-month trough of 79.260.
The index was last quoted at 79.318, down 0.3 percent.
    Oil prices rose. Front-month Brent crude oil prices 
rose $1.28 to $108.94 a barrel by 3:06 p.m. (2006 GMT). U.S.
January crude rose 73 cents, or 0.84 percent, to settle
at $87.93 a barrel, having traded from $87.21 to $88.16. 
    In other assets, gold, seen as a safe-haven asset, tumbled
with spot gold down 1.9 percent at $1,666.90 an ounce.
    U.S. Treasury yields rose to their highest since October on
Tuesday. The benchmark 10-year U.S. Treasury note 
was down 15/32, with the yield at 1.824 percent.
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