June 15, 2010 / 3:42 AM / 9 years ago

Euro and stocks rally on demand for European debt

NEW YORK (Reuters) - U.S. stocks rallied more than 2 percent while the euro hit a two-week high on Tuesday after successful debt sales by some of the weakest euro-zone members and signs of growing demand for personal computers boosted global appetite for risk.

The S&P 500 turned positive for the year and rose above its 200-day moving average for the first time in a month, suggesting the recent downtrend may be nearing an end.

Oil prices jumped about 2.5 percent, and European shares closed up for a fifth straight session as solid demand for Irish and Spanish government debt calmed investors’ nerves a day after Moody’s downgraded Greece’s credit rating to junk status.

Belgium also held a successful bond auction on Tuesday.

Yields paid at the auctions, however, were still sharply higher than a month ago, signaling difficult times ahead for debt-ridden European countries.

“The more the market starts to see that the credit markets are beginning to return to normalcy, the better it becomes for the euro,” said Boris Schlossberg, director of currency research at GFT in New York.

The single European currency rose as high as $1.2349, its strongest level since June 1. It later traded up 0.91 percent at $1.2328.

U.S. stocks added to gains in the afternoon after the world’s largest contract chipmakers, Taiwan’s TSMC (2330.TW) and UMC (2303.TW), said demand for their products will grow in coming months as sales of personal computers and other consumer gadgets rise.

The Dow Jones industrial average .DJI gained 213.88 points, or 2.10 percent, to 10,404.77, while the Standard & Poor's 500 Index .SPX rose 25.60 points, or 2.35 percent, to 1,115.23. The Nasdaq Composite Index .IXIC ended up 61.92 points, or 2.76 percent, at 2,305.88.

Intel Corp (INTC.O), the world’s dominant chipmaker, added 2.8 percent to $21.48, while Broadcom Corp BRCM.O climbed 5.7 percent to $35.84, and Marvell Technology Group Ltd (MRVL.O) surged 8.3 percent to $18.94.

The Philadelphia semiconductor index .SOXX surged 5.5 percent.

Buyers also snapped up beaten-down energy stocks as industry executives were grilled by a congressional panel, with some investors betting the stocks may have hit a bottom. U.S.-listed shares of BP Plc (BP.N) rose 2.4 percent to $31.39 while Halliburton Co (HAL.N) gained 6 percent to $25.46.

“You are seeing renewed confidence, and it’s certainly evident in the price action in the euro,” said Tom Schrader, managing director of U.S. equity trading at Stifel Nicolaus Capital Markets in Baltimore. “There’s definitely a trend toward returning to risky assets.”

Gains were just modestly trimmed after a report showed U.S. homebuilder sentiment fell in June by the sharpest amount since the height of the financial crisis following the expiration of a popular tax credit for home buyers.

In Europe, the FTSEurofirst 300 .FTEU3 index of top shares, ended up 0.7 percent at 1,037.68 points, its highest close since May 13.

Banks were among the biggest gainers.SX7P. BNP Paribas (BNPP.PA), Banco Santander (SAN.MC), Deutsche Bank (DBKGn.DE) and Societe Generale (SOGN.PA) rose between 2.1 and 4.2 percent.

European stocks largely ignored a slump in a closely watched indicator of German investor sentiment. The ZEW economic think-tank’s indicator fell in June at its fastest rate since 2008, hit by concerns over the European debt woes.

“The market had got to a point where sentiment was weak and valuations were attractive,” said Graham Secker, equity strategist at Morgan Stanley.

World stocks .MIWD00000PUS gained 1.5 percent, up for a sixth day, while emerging market stocks .MSCIEF climbed 0.8 percent, according to benchmark MSCI indexes.

Prices of U.S. Treasuries fell as demand for safe-haven assets decreased. Benchmark 10-year notes were down 13/32, with the yield at 3.308 percent.

U.S. crude oil prices jumped 2.4 percent to $76.94 per barrel as investors grew more confident about the prospects for a global economic recovery.

Despite the improved appetite for risk, gold prices remained on the rise. Spot gold traded up 1.1 percent at $1,234.60 an ounce.

Additional reporting by Edward Krudy; Editing by Dan Grebler

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