Reuters: US Dollar Report: GLOBAL MARKETS-US GDP data boost euro; Spain yields up

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GLOBAL MARKETS-US GDP data boost euro; Spain yields up Apr 27th 2012, 15:05 Fri Apr 27, 2012 11:05am EDT * Spain, Italy yields nudge higher after Spanish downgrade * Italy calms nerves by selling almost 6 bln euros of bonds * Lower-than-expected U.S. GDP leaves Fed easing door open By Luciana Lopez NEW YORK, April 27 (Reuters) - Disappointing U.S. economic growth data eroded a stock rally on Friday and boosted the euro on expectations of more U.S. monetary easing, as Spanish and Italian borrowing rates nudged up after a two-notch downgrade of Spain's sovereign credit rating. First-quarter U.S. economic growth cooled as businesses cut back on investment and restocked shelves at a slower pace. Gross domestic product expanded at a 2.2 percent annual rate, below economists' expectations for a 2.5 percent pace. The data were "certainly a bit of a mixed picture," said Camilla Sutton, chief currency strategist at Scotia Capital. "It does open the door for the Fed to remain dovish." The Dow Jones industrial average gained 12.07 points, or 0.09 percent, to 13,216.69. The Standard & Poor's 500 Index dropped 0.12 points, or 0.01 percent, to 1,399.86. The Nasdaq Composite Index gained 4.98 points, or 0.16 percent, to 3,055.59. "I don't think it is terribly surprising. We had been expecting something like this, something sub 2.5 percent growth," said Steven Baffico, chief executive at Four Wood Capital Partners in New York. "There's nothing catastrophic happening, this is just slow growth, and this underscores that the economy is on sound footing but nothing more." The FTSEurofirst 300 index of top European shares climbed 0.57 percent, helped by encouraging earnings figures from Swedish machinery and tool maker Sandvik and France's Vinci. But investors pushed Spain's 10-year borrowing rate briefly above 6 percent, after Standard & Poor's late on Thursday cut Spain's credit rating to BBB plus on concern about the government's exposure to its ailing banks. Spanish data released Friday highlighted the extent of economic weakness in the highly indebted country, with nearly a quarter of the nation's workforce unemployed and retail sales falling for the 21st consecutive month. Yields on the 10-year bond slipped backed later to around 5.918 percent. Italian yields were also slightly higher, but nerves eased as it sold 5.95 billion euros of new bonds without incident, even though at higher rates. The benchmark 10-year U.S. Treasury note was down 1/32, with the yield at 1.9488 percent. The euro edged higher, lifted by the possibility the U.S. Federal Reserve could launch another round of quantitative easing, which would be dollar negative. The euro has been rangebound recently, trading largely within $1.3 to $1.34 for much of the year. The single currency rose 0.34 percent to $1.3253 against the greenback, which also lost 0.68 percent to 80.46 yen . While the Bank of Japan increased bond buying and made other changes to its purchase program, the measures were seen as incremental rather than significant steps to try to dig the Japanese economy out of the doldrums. Oil dropped on the Spanish downgrade but pared losses on revived hopes of further liquidity injections from the Fed. Brent crude, widely used as a global oil benchmark, fell 0.2 percent to $119.68 per barrel. U.S. crude oil dropped 0.18 percent to $104.36 a barrel. Link this Share this Digg this Email Reprints

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