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GLOBAL MARKETS-Stocks, euro rally on Greece austerity vote
June 30, 2011 / 4:57 PM / 6 years ago

GLOBAL MARKETS-Stocks, euro rally on Greece austerity vote

* Greece passes final austerity measures to secure funding

* US Midwest activity jumps, further boosting stocks

* Treasuries prices fall on Greece relief, end of QE2

By Edward Krudy

NEW YORK, June 30 (Reuters) - World stocks rose to their highest level in month and the euro surged on Thursday as Greece approved the final austerity measures needed to secure international funding and avert imminent bankruptcy.

An unexpected jump in business activity in the U.S. Midwest helped quell fears about an economic slowdown that have weighed on equities over the past two months, pushing investors into stocks and out of safe-haven U.S. government bonds on the last day of the quarter. For details, see [ID:nN9E7HG00J].

Prices of U.S. Treasury bonds fell for a fourth straight day and as the Federal Reserve marked the end of its $600 billion bond-buying program to stimulate the economy.

Speculation that Greece would pass its austerity plans had sparked a sell-off in Treasuries and a big rally in equity markets earlier this week.

“Fear of an imminent euro collapse has been put to bed, and anyone who has been on the sidelines can come back in,” said Douglas Borthwick, managing director at Faros Trading in Stamford, Connecticut.

The Greek Parliament approved detailed austerity and privatization bills required by the European Union and the International Monetary Fund in exchange for emergency funding. [ID:nL6E7HU0SS]

Copper prices rose to a two-month high as the passage of Greece’s austerity plan supported investors’ appetite for risky assets, as well as positioning ahead of the end of the quarter. Three-month copper CMCU3 on the London Metal Exchange closed at $9,430 -- its highest since end-April

“There’s a relief rally -- it suggests there was some uncertainty prior to the vote that maybe the implementation part would cause problems, and now that it didn’t you’ve seen this relief rally come through,” Danske Bank analyst Christin Tuxen said.

Goldman Sachs in a research note said that its “commodity team expects the recent sell-off to reverse and for many commodities to breach their recent highs over the next 12 months.” Goldman said it sees Brent crude oil reaching $130 a barrel in 12 months.

In equity markets, the MSCI All-Country World Index .MIWD00000PUS climbed 1.3 percent in its fourth session of gains to its highest level since June 2. In Europe, the FTSEurofirst 300 index .FTEU3 of top shares rose, with a provisional close up 1.1 percent at 1,110.97 points.

On Wall Street, the surprisingly strong data on U.S. Midwest factory activity bolstered sentiment as the vote in Greece meant that investors could refocus on the economy as the quarterly earnings season prepares to get under way.

The Dow Jones industrial average .DJI rose 137.40 points, or 1.12 percent, to 12,398.82. The Standard & Poor's 500 Index .SPX added 12.52 points, or 0.96 percent, to 1,319.93. The Nasdaq Composite Index .IXIC gained 30.82 points, or 1.12 percent, to 2,771.31.

The CBOE volatility index.VIX , which is known as the VIX and is a widely used measure of fear on Wall Street, fell nearly 7 percent to its lowest level in a month.

The euro EUR= was headed for its second quarterly gain against the dollar after the Greek Parliament passed the crucial austerity measures. The euro gained 0.6 percent to $1.4521.

“There has been less demand for euros lately, given all the uncertainty. But this brings some certainty back to the market -- at least for the next year -- and the euro should rally considerably,” said Borthwick.

Expectations of another euro-zone rate rise next week, bolstered by comments from European Central Bank President Jean-Claude Trichet, also supported the European single currency.

The weaker dollar earlier helped push up oil prices. But ICE Brent crude LCOc1 later fell, losing 0.66 percent to $111.66 a barrel as investors worried about violence in Greece and remained uncertain about the International Energy Agency’s emergency release plan for crude stocsk. (Additional reporting by Brian Gorman, Emily Flitter, Nick Olivari; Editing by Leslie Adler)

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