Reuters: US Dollar Report: GLOBAL MARKETS-Shares rally on ECB news; euro bounces off lows

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GLOBAL MARKETS-Shares rally on ECB news; euro bounces off lows Aug 24th 2012, 18:44 Fri Aug 24, 2012 2:44pm EDT * U.S. and European shares rebound on ECB talk * ECB mulls setting target bands for bond yields -sources * Bernanke's letter: Fed has scope to give more stimulus By Wanfeng Zhou NEW YORK, Aug 24 (Reuters) - U.S. and European stocks rose and the euro bounced off lows against the dollar on Friday after sources said the European Central Bank is considering setting yield-band targets in a new bond-buying program aimed at containing the debt crisis . Stocks had earlier come under pressure on renewed worries about Greece and uncertainty over how Europe will attempt to bring down Spain's crippling borrowing costs. Speculation has grown in recent weeks that the ECB will soon start buying Spanish and Italian bonds. Setting a yield band is an option gaining favor among central bankers, but the decision would not be made before the ECB's Sept. 6 policy meeting, central bank sources told Reuters on Friday. It wasn't clear how wide the band would be or how the ECB would decide when to intervene in the bond markets to lower borrowing costs. "Any time we get comments out of Europe that create a perception that they are working diligently to solve the debt issue, the euro starts to rally, (the) dollar goes lower and in return, our equity markets move higher," said Randy Frederick, managing director of active trading at Charles Schwab. "I'm not sure if this will have lasting impact on the market." Further boosting investor sentiment, U.S. Federal Reserve Chairman Ben Bernanke said the Fed has room to deliver additional monetary stimulus to boost the U.S. economy. Bernanke made the comment in a letter to a congressional oversight panel. The Dow Jones industrial average was up 88.20 points, or 0.68 percent, at 13,145.66. The Standard & Poor's 500 Index was up 8.54 points, or 0.61 percent, at 1,410.62. The Nasdaq Composite Index was up 17.10 points, or 0.56 percent, at 3,070.50. The FTSEurofirst-300 index of pan-European shares rose 0.11 percent to end at 1,090.38 points. The MSCI global stock index was little changed at 324.51. Mixed U.S. economic data on Friday added to uncertainty over whether the Fed would act soon to bolster the stalled economic recovery. Hopes for action had grown after minutes from the Fed's latest meeting showed policymakers might deliver another round of stimulus "fairly soon" unless the economy improves considerably. New orders for long-lasting U.S. manufactured goods surged in July, but a gauge of planned business spending declined for a second straight month, pointing to slowing growth in manufacturing. "The overall feeling is that the economy is still trending in the right direction," said Ravi Bharadwaj, a market analyst at Western Union Business Solutions in Washington. "For now, based on the string of reports we've had so far, there doesn't seem to be a need of further quantitative easing from the Fed." Bernanke and other central bank leaders meet in Jackson Hole, Wyoming, next week for an annual get-together that could shed light on the outlook for monetary policies. GREECE WORRIES RESURFACE Sentiment remained fragile and worries about Greece supported safe-haven German government bonds, which rallied to their biggest weekly gains since early July. Germany and France want Greece to stay in the euro zone, but Athens must meet its commitments, German Chancellor Angela Merkel said after meeting Greek Prime Minister Antonis Samaras. The euro fell 0.2 percent to $1.2535, off a session low of $1.2481 on Reuters data. It briefly erased losses to trade little changed after the ECB report and was on track for a weekly gain of 1.6 percent, the biggest in 2-1/2 months. The euro zone's common currency fell to a session low against the dollar after Market News International reported that senior euro-zone officials said the German Finance Ministry is seriously considering a plan in which Greece would be obliged to ask for a temporary exit from the euro zone until it sorts out its public finances. Against the yen, the dollar rose 0.2 percent to 78.62 yen . The benchmark 10-year U.S. Treasury note erased gains to trade 1/32 lower in price, yielding 1.6762 percent. Brent crude seesawed as concerns about Europe and the global economy clouded the outlook for demand, while a tropical storm and other potential threats to supply lifted U.S. oil futures. Brent October crude fell $1.35 to $113.66 a barrel. U.S. crude was down 25 cents at $96.02 a barrel. Gold prices stayed on track for their biggest weekly gain since early June, following a seven-session rally to 4 1/2-month highs. U.S. gold futures for December delivery rose 10 cents to $1,672.90 an ounce in early afternoon trading in New York. Spot gold last traded at $1,670.20 an ounce. Link this Share this Digg this Email Reprints

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