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GLOBAL MARKETS-Euro, stocks rise on central bank action hopes

by on July 27, 2012 4:35 pm BST
 

Fri Jul 27, 2012 12:35pm EDT

* German, French leaders voice strong support for euro zone

* Oil futures, metals prices also rise

* Italian, Spanish bond yields fall

* ECB wants gov’ts to tap bailout funds before
intervening-report

By Rodrigo Campos

NEW YORK, July 27 (Reuters) – Stocks and the euro rallied on
Friday and bond yields dipped in Spain and Italy on growing
expectations of European Central Bank action to tackle high
borrowing costs. Oil futures and metal prices also advanced.

The markets received additional support after French and
German governments said they are “determined to do everything to
protect the euro zone” and its single currency. The joint
statement echoed European Central Bank President Mario Draghi’s
comments on Thursday and overshadowed concern after Germany’s
Bundesbank pushed back against Draghi’s pledge.

French newspaper Le Monde reported that the ECB was willing
to take part in action to lower the bond yields of countries
such as Spain and Italy if governments agreed to tap the bloc’s
bailout funds.

Expectations that the Federal Reserve will act to support
the U.S. economy also grew after data showed U.S. gross domestic
product expanded at a 1.5 percent annual rate from April through
June, roughly in line with lowered expectations.

“That rate of growth will not aid the Fed’s employment
mandate, so they will act sooner rather than later,” said John
Kilduff, partner at Again Capital LLC in New York.

“The prospect for easing will be supportive for crude oil,
other commodities and equities.”

Market expectations are high for another round of asset
purchases from the Fed, which in the past have sparked rallies
in stocks and commodities. Markets are also beginning to price
in a move from the ECB, possibly in the form of bond purchases.
Both central banks hold separate meetings next week.

The Dow Jones industrial average rose 98.57 points,
or 0.76 percent, to 12,986.50. The S&P 500 Index added
14.29 points, or 1.05 percent, to 1,374.31. The Nasdaq Composite
gained 34.47 points, or 1.19 percent, to 2,927.72.

The FTSEurofirst 300 unofficially closed up 1.25
percent and an MSCI gauge of global equities added 1.3
percent.

Copper prices jumped 1.3 percent while Brent
and U.S. oil prices rose for a fourth day running,
although they were both still negative for the week after
plummeting Monday.

The euro hit a three-week high versus the U.S. dollar, at
$1.2377 and is up 1.7 percent versus the dollar this week, its
largest such advance since late February. On Tuesday the euro
was at a two-year low of $1.2040

In his statement on Thursday Draghi appeared to target the
bond market as he said monitoring rising borrowing costs in
bloc members as they affect monetary policy was within the ECB’s
mandate.

Ten-year Spanish bond yields hit a low of
6.731 percent, the lowest since July 17, while the Italian
benchmark bond yield dipped below 6 percent for
the first time in a week.

In line with a move towards riskier assets, the benchmark
10-year U.S. Treasury note was down 22/32, with the
yield at 1.5105 percent.