Reuters: US Dollar Report: GLOBAL MARKETS-Euro bailout fund approval boosts global stocks

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GLOBAL MARKETS-Euro bailout fund approval boosts global stocks Sep 12th 2012, 09:07 Wed Sep 12, 2012 5:07am EDT * Germany's Constitutional Court backs ESM plans * MSCI global index hits 5-month high * Euro hovers at 4-month high versus dollar * Demand for German government bonds dips By Marc Jones LONDON, Sept 12 (Reuters) - European shares rose though benchmark Italian and Spanish bonds were little changed on Wednesday after Germany's top court gave its backing to the euro zone's new 700 billion euro European Stability Mechanism bailout fund. German approval of the ESM was crucial to boost the euro zone's crisis fighting powers and a key requirement for the European Central Bank's new plan to buy the bonds of struggling euro members. European shares were up 0.65 percent after the decision, having been up just 0.07 percent beforehand. The MSCI global share index hit a 5-month high of 331.99 points. The euro eased off the accelerator slightly, dipping back to $1.2896, having hit a four-month high before the decision of $1.2906 versus a broadly weaker dollar. "The market was expecting it to be ratified but with some conditionality, which seems to be the case. The conditionally that I've seen so far doesn't come as a great surprise," said Kevin Lilley, European Equities Fund Manager, Old Mutual Asset Management. "It hasn't shocked the market in a negative sense, and therefore it allows the market to move forward." Spanish, Italian and German share indexes were all up between 1 percent and 1.3 percent. "The (equities) market will rally on this, and the financials will lead this rally," said Gerard Lane, Equity Strategist at Shore Capital. "The fear was they were going to say 'nein', so the 20 percent down in the market that we could have had is off the table." Bund futures fell to a session low of 139.75. Benchmark 10-year euro zone periphery bond markets showed little reaction to the decision, though Italian BTP futures extended gains to stand up 32 ticks on the day at 105.54. "It's the long end (of bond maturities) now where we need to see a move, but for that to happen we need the country (Spain) to activate the (ECB) programme and clarity from the EFSF/ESM on whether they want to support the long end," said ING strategist Alessandro Giansanti. Analysts at Morgan Stanley were eyeing further gains for euro following the German thumbs-up for the ESM. "We would expect the euro dollar recovery to extend further in the near term. We maintain our buy on pull-backs strategy, although pull-backs have remained very limited so far," they said in a note. Link this Share this Digg this Email Reprints

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