Reuters: US Dollar Report: GLOBAL MARKETS-Euro drops, bonds rise after Merkel comments

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GLOBAL MARKETS-Euro drops, bonds rise after Merkel comments Jul 18th 2012, 18:03 Wed Jul 18, 2012 2:03pm EDT * Dollar, Treasuries and German bonds gain on safety bid * U.S., European stocks rise on corporate results * Crude rises on fear Syria's fighting to tighten oil supply By Herbert Lash NEW YORK, July 18 (Reuters) - The euro fell broadly on Wednesday after comments by German Chancellor Angela Merkel reignited worries about the euro zone debt crisis and government bond prices rose over fears of slow economic growth. In a seeming contradiction to the growth fears in the bond markets, U.S. stocks jumped and European shares advanced to two-week highs, lifted by solid corporate results on both sides of the Atlantic. Investors who have worried about the impact of a limping global economy on earnings breathed a sigh of relief at forecast-beating results from the world's largest chip equipment maker, ASML ; leading Scandinavian bank Nordea and Norwegian fertilizer company Yara International. In the United States, profits of diversified manufacturer Honeywell Inc topped consensus views amid what it called a "tough macroeconomic environment" and top chipmaker Intel Corp reported healthy gross margins after reducing its growth forecast. The S&P 500 touched its highest level since early May. Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh, said companies are generating less revenue than forecast but earnings are still above expectations. "Analysts have moved their targets (lower), and companies still are lean and mean and are able to generate profit," she said. U.S. Treasury debt prices rose as investors turned defensive on persistent economic worries and financial contagion from the euro zone, which pushed bond yields toward historic lows. The euro stumbled to its lowest level in 3-1/2 years against the British pound and extended broad losses against other currencies after Merkel's comments. The single currency hit a record low against the Australian dollar and an 11-1/2-year low against the Swedish crown. "We have not yet shaped the European project so that we can be sure that everything will turn out well, we still have work to do," Merkel was quoted in a media report as saying. The German chancellor also reiterated her belief that the euro will survive, saying she was "optimistic that we will succeed." "It's all about Merkel comments," said Vassili Serebriakov, senior currency strategist at Wells Fargo in New York. "The mere fact that Merkel made a comment about the euro project has raised concern." The euro fell 0.2 percent to $1.2269, and the U.S. dollar index was up 0.01 percent at 83.043. The sale of 4.17 billion euro of zero coupon two-year German bonds drew the strongest demand since January, as investors paid Berlin to park cash in its two-year debt at auction for the first time ever. Ten-year Bund yields were 3 basis points lower at 1.20 percent, not far from the record low of 1.13 percent hit in January. The benchmark 10-year U.S. Treasury note was up 8/32 in price to yield 1.4807 percent. A rebound in tech stocks lifted Wall Street. Intel late Tuesday cut its full-year revenue outlook, the latest tech company to warn about slowing demand, but its shares rebounded 2.96 percent to $26.13 and lifted technology shares. The PHLX semiconductor index jumped 3.7 percent a day after hitting its lowest level to date this year. "We're relatively stable today with a relief rally in Intel since people were worried the results would be much worse than what was delivered," said Clark Yingst, chief market analyst at Joseph Gunnar & Co in New York. The Dow Jones industrial average was up 98.43 points, or 0.77 percent, at 12,903.97. The Standard & Poor's 500 Index was up 9.73 points, or 0.71 percent, at 1,373.40. The Nasdaq Composite Index was up 36.74 points, or 1.26 percent, at 2,946.78. The pan-European FTSEurofirst 300 index closed up 1.2 percent at 1,053.70 points, well within a 2.5 percent trading range of the past week. Brent crude gained for a sixth session, with bloodshed in Syria highlighting potential supply issues. Brent crude was up $1.22 to $105.22 a barrel. U.S. oil rose 65 cents to $89.87 a barrel. Link this Share this Digg this Email Reprints

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