Reuters: US Dollar Report: GLOBAL MARKETS-Stocks up on US data, euro down before summit

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GLOBAL MARKETS-Stocks up on US data, euro down before summit Jun 27th 2012, 17:30 Wed Jun 27, 2012 1:30pm EDT * Global stocks gain after US home sales data * US prices climb above $80 per barrel * Euro down for 3rd day on dim hopes for EU summit By Wanfeng Zhou and Barani Krishnan NEW YORK, June 27 (Reuters) - Stocks rose on major world markets on Wednesday after better-than-expected U.S. economic data, but the euro slipped against the U.S. dollar ahead of a European summit that is unlikely to produce a credible solution to the region's debt crisis. Shares on Wall Street were up as demand for long-lasting U.S. manufactured goods rose sharply more than expected in May and contracts to buy homes on resale matched a two-year high. "Today's figure is the last of the May housing data seen over the past week and signs still point to an industry trying to keep its head above water after a miserable five years," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. "Getting out of the water though will still take a lot of patience and time." Data showing better-than-expected demand for long-lasting U.S. manufactured goods in May also provided support, although worries about slowing global growth offset some of the positive sentiment. On commodity markets, U.S. oil prices returned to above $80 per barrel the first time in nearly a week and Brent crude in London erased early losses as a strike by Norwegian oil workers dragged on. EUROPEAN LEADERS AT ODDS European Union leaders remained unusually divided ahead of a summit on Thursday and Friday over how to stem the bloc's spreading debt crisis, now in its third year. In a comment earlier this week, Bridgewater Associates, the world's largest hedge fund, noted that European sovereign and bank deleveraging could very well be a disorderly event, even as investors seem to be betting otherwise. "This 'fat tail' event must be considered a significant possibility," Bridgewater wrote. Germany's Angela Merkel has already said that total debt liability would not be shared in her lifetime, giving little support to Italian and Spanish pleas for immediate action. Rome and Madrid have seen their borrowing costs spiral to a level which for Spain at least would not be sustainable. "Merkel continues to paint the newswires with her thoughts on the EU way forward as the Eurobond concept does not appeal to her still, and the EU blueprint seems a little off in her eyes," said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut. "I don't think we will get anything substantive out of the EU summit and neither does the market after having been told as much over the past several days by EU officials." At 1.00 p.m. ET, Wall Street's Dow Jones industrial average was up 89.69 points, or 0.72 percent, at 12,624.36. The Standard & Poor's 500 Index was up 12.45 points, or 0.94 percent, at 1,332.44. The Nasdaq Composite Index was up 24.21 points, or 0.85 percent, at 2,878.27. European shares rose 1.4 percent, heading for their largest gain in just over a week. The MSCI world equity index rose nearly 1 percent, though it was still down slightly for the week so far. The euro edged lower, slipping against the dollar for a third straight day as it traded 0.1 percent down at $1.2472. Growing concerns that more peripheral euro zone nations will be shut out from capital markets and expectations that fiscal austerity will drag the region into a more painful recession will see the euro stay under pressure. Any bounce toward the $1.27 or $1.28 level would attract sellers, traders said. "I am going short euro/dollar into the summit," said Stuart Frost, head of absolute returns and currency at RWC Capital, a London-based fund manager. "The euro should be a lot lower than what it is and even if there is an agreement, chances of which are very low, the currency is headed towards $1.20." EURO BONDS Debt markets continued to reflect the worsening funding outlook for many euro zone nations, with investors reluctant to increase their exposure even to safe-haven debt ahead of the leaders' summit. Italy's six-month borrowing costs rose to 2.957 percent at auction on Wednesday, their highest since December. The spike comes just ahead of a five- and 10-year debt sale for up to 5.5 billion euros on Thursday. On Tuesday, Spain saw its short-term borrowing costs nearly triple. The benchmark 10-year U.S. Treasury note was down 1/32, its yield at 1.6296 percent. Markets had been hoping this week's summit would deliver at least a high-level agreement on greater fiscal and financial integration across the euro area that could then ultimately lead to the issuance of common euro bonds. "It is slightly different than what we saw before other summits in the past when hopes were quite high," said Norbert Wuthe, senior government bond strategist at Bayerische Landesbank. "Now we are disappointed going into the summit and there is a positive surprise potential." Link this Share this Digg this Email Reprints

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