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GLOBAL MARKETS-Euro rises on ECB talk of stemming debt crisis

by on July 25, 2012 5:29 pm BST
 

Wed Jul 25, 2012 1:29pm EDT

* Euro gains on ECB official’s comments

* U.S. data keeps equities under pressure

* Weak German Ifo data adds to growth worries

* Concerns over Spain and Greece persist

By Rodrigo Campos

NEW YORK, July 25 (Reuters) – The euro rose on Wednesday,
helped by suggestions that European policymakers will find more
ways to stem the region’s debt crisis, but weak global economic
data and an earnings disappointment from Apple kept stocks under
pressure.

The S&P 500 fell after data showed a large drop in new home
sales, but the Dow rose after manufacturers Caterpillar
and Boeing lifted their 2012 forecasts.

Apple Inc, the world’s most valuable company,
posted a rare miss in revenue and earnings late on Tuesday. Its
stock fell 4.2 percent to $575.14, weighing on the Nasdaq
composite index and the overall market.

Support from central banks has been expected by markets for
weeks as economic data sags globally. A weak reading on
Britain’s gross domestic product and a German business sentiment
survey added to worries about slowing growth.

Top Fed officials recently spelled out what measures they
might take to boost growth and hiring. Fed action could come as
soon as next week, as its policy-setting committee meets Tuesday
and Wednesday.

ECB Governing Council member 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 desperate and jumping on anything that even
looks remotely positive,” said Geoff Kendrick, currency
strategist at Nomura.

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

The euro rose 0.6 percent to $1.2132, although the
outlook remains weak and it is only just above a two-year low of
$1.2042 hit Tuesday.

The single currency pared some of its initial gains against
the dollar after data showed new U.S. single-family home sales
in June fell by the most in more than a year and prices resumed
their downward trend.

“We had a little bounce this morning on the Caterpillar and
Boeing news. A little positive news certainly set the day off
right, but certainly hard to sustain, given that there was
competing negative news,” said Janna Sampson, co-chief
investment officer at OakBrook Investments LLC in Lisle,
Illinois.

The Dow Jones industrial average rose 35.42 points,
or 0.28 percent, to 12,652.74. The S&P 500 Index dropped
2.49 points, or 0.19 percent, to 1,335.82. The Nasdaq Composite
fell 9.73 points, or 0.34 percent, to 2,853.26.

The pan-European FTSEurofirst 300 index dipped 0.07
percent after the U.S. data and Wall Street’s decline reversed
an earlier advance.

The MSCI world equity index edged 0.2
percent lower and has fallen 2.5 percent so far this week as
concerns about the impact of Europe’s problems on growth spread
across the world.

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

ECONOMIC GLOOM DARKENS

The gains in the euro came despite the weak economic data
from Germany, which reinforced the view that even the European
Union’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.

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 7/32, with
the yield at 1.4126 percent after earlier rising as high as 1.44
percent. The yield hit an all-time low on Tuesday.

Gold rose more than 1 percent as expectations of U.S. and
European monetary stimulus strengthened its appeal as an
inflation hedge. Gold futures jumped 1.7 percent to
$1,602.50 an ounce.