Reuters: US Dollar Report: GLOBAL MARKETS-Stocks gain on hopes of new policy easing

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GLOBAL MARKETS-Stocks gain on hopes of new policy easing Jul 3rd 2012, 15:46 Tue Jul 3, 2012 11:46am EDT * Downbeat factory data adds to central bank easing expectations * Euro rebounds above $1.26 in anticipation of ECB rate cut * Commodity prices rebound, oil lifted by Iran and supply fears By Herbert Lash NEW YORK, July 3 (Reuters) - Global shares rose and the euro rebounded on Tuesday on growing expectations that major central banks will act to bolster the world economy after weak manufacturing data earlier this week highlighted the drag on growth from the euro zone debt crisis. The euro climbed above $1.26 while U.S. and European equity markets advanced in thin trade as investors positioned for an expected rate cut by the European Central Bank when its policy-makers meet on Thursday. U.S. markets close early on Tuesday ahead of the Independence Day holiday on Wednesday, when they remain shut. Investors expect the ECB and Bank of England, which also meets on Thursday, to enact further measures to combat slow growth. "There is nothing specific, an early fixing and positioning ahead of the ECB on Thursday," said Kathy Lien, managing director at BK Asset Management in New York, referring to the euro's rebound. Analysts expect the ECB to cut its main refinancing rate by 25 basis points to 0.75 percent, and it may take more "non-standard" measures - such as reactivating its own bond-buying program or offering banks fresh liquidity. Worldwide manufacturing data on Monday renewed fears the world economy could tip into recession and raised expectations the Federal Reserve will embark on another round of asset purchases, dubbed QE3, in an effort to stimulate growth. The Bank of England also is widely expected to restart its own quantitative easing program, approving 50 billion pounds or more of gilt purchases over three months. The prospect of further central bank action lifted the price of gold and other commodities, including copper and oil. Crude jumped above $100 a barrel for the first time in three weeks as tension over Iran increased concerns about threats to supply. "If the ECB offers loud support this Thursday with a rate cut and a signal of more to follow in the face of lower growth and inflation, there may be enough fuel for a summer rally in stock markets," said Bill O'Neill, EMEA chief investment officer for Merrill Lynch Wealth Management. The Dow Jones industrial average was up 0.53 percent at 12,939.69. The Standard & Poor's 500 Index was up 0.59 percent, at 1,373.62. The Nasdaq Composite Index was up 0.65 percent at 2,970.44. Data on Tuesday showed new orders for U.S. factory goods rose more than expected in May, although data the previous day suggested U.S. manufacturers are vulnerable to Europe's festering debt crisis. The stimulus hopes drove the FTSE Eurofirst 300 index of top European companies up almost 1.0 percent to 1045.27. MSCI's all-country world equity index also rose 1.0 percent at 316.48, while its emerging markets index was up 1.8 percent. U.S. Treasury debt prices eased as investors booked profits from Monday's gains that came on a surprisingly weak June report on U.S. manufacturing activity. A similar measure of factory activity in the euro area also held steady at its lowest level since June 2009, while joblessness across the region rose to a record high in May. The benchmark 10-year U.S. Treasury note was down 10/32 in price to yield 1.6191 percent. Many market players believe a weak U.S. jobs report on Friday could push the U.S. Federal Reserve into a third bout of quantitative easing - the policy of creating money to fund asset purchases that has lifted riskier assets such as shares and commodities in the past. The euro was up 0.18 percent at $1.2608. The dollar was down against a basket of major trading-partner currencies, with the U.S. dollar index off 0.18 percent at 81.726. Crude oil rose. Brent crude was up $3.52 a barrel to $100.86 a barrel. U.S. crude rose $3.70 to $87.45 a barrel. Spot gold prices rose $24.56 to $1,620.30 an ounce. Link this Share this Digg this Email Reprints

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