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GLOBAL MARKETS-Euro rises on ECB talk, earnings buoy Dow

by on July 25, 2012 8:42 pm BST
 

Wed Jul 25, 2012 4:42pm EDT

* Euro gains on ECB policymaker’s comments on banking
license

* Caterpillar, Boeing raise profit outlooks

* Apple weighs on U.S. stocks after revenue miss

* Concerns over Spain and Greece persist

By Rodrigo Campos

NEW YORK, July 25 (Reuters) – The euro rose against the
dollar for the first time in six days on Wednesday after
suggestions that European policymakers will consider new ways to
tackle the region’s debt crisis, while U.S. earnings supported
blue-chip stocks.

Higher 2012 profit forecasts from big manufacturers
Caterpillar and Boeing and an outlook for
quarterly revenue growth from chipmaker Broadcom helped
to offset news of an unexpected drop in new U.S. home sales.

On Wall Street, the Dow snapped a three-day losing streak
and the S&P and Nasdaq slipped only modestly, even as shares of
Apple Inc, the world’s most valuable publicly traded
company, fell 4.3 percent to $574.97 after it posted a rare miss
in revenue late on Tuesday.

“I’m encouraged investors are taking the Apple news pretty
well,” said Jack Ablin, chief investment officer at Harris
Private Bank in Chicago.

Ablin said after a more than 40 percent rise in Apple shares
this year, Wednesday’s drop is but a speed bump, adding that the
raised outlooks from Dow components Caterpillar and Boeing “is a
huge positive for the market.”

The Dow Jones industrial average rose 58.73 points,
or 0.47 percent, to 12,676.05. The S&P 500 Index dipped
0.42 point, or 0.03 percent, to 1,337.89. The Nasdaq Composite
Index fell 8.75 points, or 0.31 percent, to 2,854.24.

The euro rose 0.8 percent to $1.2156, although the
outlook remains weak and it remained only just above a two-year
low of $1.2042 hit Tuesday.

A member of the European Central Bank’s Governing Council,
Ewald Nowotny, said there were arguments for giving Europe’s new
permanent rescue fund a banking license, enabling it to borrow
unlimited central bank money and boosting its capacity to
prevent the euro zone debt crisis from spreading.

Analysts said the market may have put too much emphasis on
the comments, given other ECB officials’ opposition to the idea.
Investors would likely sell into the euro’s rally, the analysts
said.

“The market is grasping for any positive news,” said Omer
Esiner, chief market analyst at Commonwealth Foreign Exchange in
Washington, D.C. “It adds to the already somewhat improved tone.
Whether or not it lasts is the question.”

Market support from central banks has been expected for
weeks as economic data sags globally. Weak readings on Britain’s
gross domestic product and on a German business sentiment survey
added to worries about slowing growth.

FED TO ACT SOON?

Top Fed officials recently spelled out what measures they
might take to boost growth and hiring. Fed action could come as
soon as its policy meeting next week, on July 31-Aug. 1.

“Right now in my view it’s still Fed rhetoric, but enough to
keep investors confident to take risk. I don’t necessarily see
tangible action. I think the Fed is afraid to take action,
fearful the market could shrug it off,” Ablin said.

Despite a sluggish recovery and a suggestion by some
analysts that the U.S. economy may already be in recession, the
S&P 500 hit its highest level in 2-1/2 months last week.

The MSCI world equity index was flat on
Wednesday, but has fallen 2.4 percent so far this week as
concerns about the impact of Europe’s problems on growth spread
across the world.

U.S. dollar-denominated Nikkei futures rose 0.1
percent in choppy trading. The pan-European FTSEurofirst 300
index closed 0.07 percent lower.

Further supporting the euro, Spain and France said that a
single supervisory mechanism for the bloc’s banks needs to be
adopted by the end of the year.

ECONOMIES SAG

The gains in the euro came despite the weak economic data
from Germany and the UK, which reinforced the view that even
Europe’s biggest economies were being damaged by the debt
crisis.

German business sentiment dropped in July for the third
straight month to its lowest level in over two years, according
to the latest survey by the Munich-based Ifo think
tank.

British economic output also shrank much more than expected
in the second quarter, hit by the euro zone debt crisis and
government austerity, official data showed.

Greece was also back in the headlines with inspectors from
the EU, ECB and International Monetary Fund in Athens to decide
whether to keep it hooked up to a 130 billion euro lifeline or
let it face default.

Three EU officials have said the team was likely to conclude
Greece cannot repay what it owes, making a further debt
restructuring necessary, but no decision is expected until at
least September.

The benchmark 10-year U.S. Treasury note was down 3/32 in
price, with the yield at 1.4008 percent after earlier rising as
high as 1.44 percent. The yield hit an all-time low on Tuesday.

Gold futures rose more than 2 percent as expectations of
U.S. and European monetary stimulus strengthened its appeal as
an inflation hedge. Gold futures were last up 2 percent
at $1,608 an ounce.