GLOBAL MARKETS-Stocks, euro recover; gold below record high

15:59, Tuesday 19 July 2011

* Stocks, euro rebound after Monday sell-off on debt fears

* Gold hovers near $1,600/oz after touching record high

* U.S. benchmark government yields stuck below 3.0 pct

* Risk aversion remains high on euro zone, US debt debate

(Recasts lead, updates market action, adds byline)

NEW YORK (Xetra: A0DKRKnews) , July 19 (Reuters) – Wall Street stocks and theeuro rose on Tuesday, as upbeat U.S. corporate earningscountered worries over debt crises in Europe (Chicago Options: ^REURTRUSDnews) and UnitedStates.

a surprise jump in U.S. housing starts June also reducedconcern that the U.S. economy may be slipping into arecession.

“So far earnings have been showing us a better picture ofthe economy than some macroeconomic issues suggest, which isencouraging, especially with housing starts surprising to theupside,” said Michelle Gibley, senior market analyst at SchwabCenter for Financial Research in Denver.

Gold continued to attract safe-haven investment flows,although it retreated below $1,600 an ounce after touching anall-time high near $1,610 .

Italian and Spanish bonds, which were pummeled by fearsthat a possible Greek default could damage the third and fourthlargest economies in the euro zone, firmed slightly after10-year yields jumped to six percent on Monday.

Investors were focusing on a euro zone summit to be held inBrussels on Thursday, hoping it will complete a second bailoutfor Greece in an attempt to contain the sovereign debt crisis.

“There is some lightening of short positions ahead of (thesummit) on the risk there could be some sort of agreementreached,” said Omer Esiner, chief market analyst atCommonwealth Foreign Exchange in Washington.

“But an agreement on Thursday could include some form ofGreek default, which to me is not necessarily a positiveoutcome for the euro.”

the euro rose as high as $1.42172 on electronictrading platform EBS before retreating to $1.4196, still up 0.6percent on the day.

Still, risk aversion among investors remained high alsobecause of the looming Aug. 2 deadline when the U.S. governmentwill run out of funding options, pushing the world’s biggesteconomy into default and endangering its top-notch creditrating.

Political leaders in Washington are still at an impasseover raising the government’s $14.3 trillion statutory debtlimit. [ID:nN1E76H1Y0]

Investors for the most part appear to be assuming that theU.S. debt ceiling will be lifted and a default averted, withthe 10-year Treasury yield hovering near 3.0 percent.

despite jitters over the debt problems on both sides of theAtlantic (Stuttgart: A0J3C9news) , some upbeat U.S. corporate earnings results andbetter-than-expected data on housing starts kindled someappetite for stocks and other risky assets.

the Dow Jones industrial average was up 124.31points, or 1.00 percent, at 12,509.47. the Standard & Poor’s500 Index was up 13.34 points, or 1.02 percent, at1,318.78. the Nasdaq Composite Index was up 47.12points, or 1.70 percent, at 2,812.23.

European shares also rose, helped along by technologyshares that got a boost from an upbeat statement from IBM (Euronext: IBMA.NXnews) . the FTSEurofirst 300 gained 0.9 percent.

World stocks as measured by MSCI were up1.1 percent after losing 1.2 percent on Monday.

In the precious metals market, spot gold hovered at$1,600 an ounce after reaching an all-time peak of $1,609.51earlier. the metal is up 13 percent so far this year.

(Writing by Richard Leong in New York; additional reportingby Julie Haviv and Ryan Vlastelica in New York; KirstenDonovan, Emelia Sithole-Matarise and Jan Harvey in London)

GLOBAL MARKETS-Stocks, euro recover; gold below record high

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