Reuters: US Dollar Report: GLOBAL MARKETS-Stocks gain after data, euro slips before summit

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GLOBAL MARKETS-Stocks gain after data, euro slips before summit Jun 27th 2012, 15:45 Wed Jun 27, 2012 12:01pm EDT * Wall Street stocks gain after US home sales data * Hopes for progress at EU summit fade * Euro falls for 3rd day against dollar By Wanfeng Zhou and Barani Krishnan NEW YORK, June 27 (Reuters) - Stocks rose on major world markets on Wednesday, helped by better-than-expected U.S. economic data, but the euro slipped against the U.S. dollar before a European leaders summit that will likely fail to produce a credible solution to the region's debt crisis. Shares on Wall Street were up as contracts to purchase previously-owned U.S. homes rose 5.9 percent in May, matching the two-year high seen in May, fueling optimism the housing market was beginning to recover. "This is all the continuation of some pretty good news in the housing sector. Housing was keeping us down; if housing starts rallying this could be very helpful to the market," said Peter Costa, president of Empire Executions from the floor of the New York Stock Exchange. 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 briefly 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. "We think there are good reasons to doubt that European bank and sovereign deleveragings will be prevented from progressing to the next stage in a disorderly way, without a Plan B in place," Bridgewater Associates, the world's largest hedge fund with $120 billion in assets, said in a research note. "This 'fat tail' event must be considered a significant possibility," it said. 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. "This is like a slow motion car accident occurring over there and the market has certainly set this into prices," said Robert Pavlik, chief market strategist at Banyan Partners LLC in Palm Beach Gardens, Florida, about the EU summit. Nearly two hours after the open, Wall Street's Dow Jones industrial average was up 65.39 points, or 0.52 percent, at 12,600.06. The Standard & Poor's 500 Index was up 8.62 points, or 0.65 percent, at 1,328.61. The Nasdaq Composite Index was up 18.78 points, or 0.66 percent, at 2,872.84. European shares rose 1.3 percent, heading for their largest gain in just over a week. The MSCI world equity index rose 0.8 percent, though was still down nearly half a percent for the week so far. The euro fell for a third day against the dollar and was last down 0.2 percent at $1.2461, not far from a more than two-week low of $1.2440 on Reuters data on Tuesday. 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 unchanged with the yield at 1.6279 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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