Reuters: US Dollar Report: GLOBAL MARKETS-Markets buoyed by EU aid for Spanish banks

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GLOBAL MARKETS-Markets buoyed by EU aid for Spanish banks Jun 10th 2012, 23:30 Sun Jun 10, 2012 7:30pm EDT * U.S. stock futures up 1 pct, point to rally in Asia shares * Euro up 1 pct, oil jumps over $2 * Fading safe haven appetite sends 30-yr Treasury futures sharply lower By Chikako Mogi TOKYO, June 11 (Reuters) - Risk assets jumped on Monday after euro zone finance ministers agreed on loans to help Spain's battered banks, easing fears Madrid's banking woes could escalate into a bankruptcy crisis and compound the currency bloc's troubles with Greece. The euro jumped 1 percent to $1.2648, its highest since May 23, and the Australian dollar, closely linked to investors' risk appetite, gained about 0.9 percent to $1.0005 , its highest since May 15. Brent crude rose more than $2 to as high as $102.05 a barrel, while U.S. crude also gained more than $2 to as high as $86.62 a barrel in early Asian trade on Monday. U.S. stock index futures opened more than 1 percent higher on Sunday, suggesting Wall Street will extend the previous week's advance, which was the S&P's best of 2012. The rally in U.S. stock index futures indicated a strong opening for Asian shares on Monday. MSCI's broadest index of Asia-Pacific shares outside Japan posted a 0.6 percent gain last week, after falling for four weeks in a row. Japan's Nikkei average sagged 2.1 percent on Friday but managed to eke out its first weekly gain for nine weeks, narrowly avoiding its worst weekly string of losses since 1975. A return in risk appetite hit safe-haven U.S. Treasuries, sending 30-year Treasury bond futures down more than 1 point on Sunday. The 17-nation euro currency area agreed to lend Madrid up to 100 billion euros ($125 billion) for its bank rescue fund, more than an initial audit suggests it is likely to need. The European Union action is going to be a temporary success because the Spanish crisis is mostly centred around its banks, said Richard Hastings, macro and consumer strategist at Global Hunter Securities. "The immediate effect on financial markets should be beneficial. Equity markets especially respond well to short-term improvements, while bond markets, especially higher-quality debt, might continue to send out signals in the form of very high prices and low yields that the trouble is not over," Hastings said. The rescue for Spain's banks follows bailouts for Greece, Ireland and Portugal since 2010, and comes a week before a crucial election in Greece that could determine whether Athens will stay with the euro bloc. Analysts expect risk appetite to remain contained because the euro zone's structural challenge of reducing high sovereign debts and pursuing fiscal austerity, while at the same time achieving growth, will not be resolved anytime soon. "The next phase of the Spain situation comes in six to nine more months when it becomes clear that Spain's economy has not improved, thus pointing to a wider realm of distress, and that is indeed the primary concern for the entire European situation: that the relationship between banking, credit and growth remains fragmented and impaired," Hastings said. Link this Share this Digg this Email Reprints

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