Reuters: US Dollar Report: GLOBAL MARKETS-Shares, euro advance on growth in U.S. manufacturing

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GLOBAL MARKETS-Shares, euro advance on growth in U.S. manufacturing Oct 1st 2012, 15:04 Mon Oct 1, 2012 11:04am EDT * Major stock indexes rise at start of quarter * U.S. manufacturing unexpectedly expands in September * Euro gains versus dollar, U.S. crude advances By Wanfeng Zhou NEW YORK, Oct 1 (Reuters) - Stocks in major markets rallied at the start of a new quarter after a survey showed the U.S. manufacturing sector expanded last month for the first time since May, offsetting weak factory data in Europe and Asia. Results of a Spanish bank stress test on Friday that showed troubles in the sector were no worse than feared helped boost the euro. Spanish bond yields fell although uncertainty remained about when Madrid will request a bailout from the E.U. U.S. manufacturing activity rebounded in September as new orders and employment picked up, an industry report showed on Monday. It was the first time since May that the index has been above the 50 threshold that indicates expansion in the sector. Earlier, surveys showed factory output in Europe and Asia wilted again last month, flagging a return to recession for the euro zone and a seventh straight quarter of slowing growth in China. "The U.S. economy is growing at a slow pace, but it is still growing. The ISM number suggests that things are not that bad. We're not quite at the point where things are good, but this indicates strongly that things are not so bad," said Adam Sarhan, chief executive of Sarhan Capital in New York. "Despite a recent spate of weaker-than-expected data from across the world, markets are looking forward. There is a lot of hope that the worst-case scenario is off the table not only for now, but for good." The MSCI global stock index rose 1.0 percent to 334.93. The FTSEurofirst-300 index of pan-European shares rose 1.51 percent to end at 1,105.68 points. Wall Street stocks rose after closing out their best third quarter since 2010. The Dow Jones industrial average gained 136.55 points, or 1.02 percent, at 13,573.68. The S&P 500 was up 15.07 points, or 1.05 percent, at 1,455.74. The Nasdaq Composite rose 27.77 points, or 0.89 percent, at 3,144.00. SPAIN GAIN Spanish banks will need 59.3 billion euros in extra capital to ride out a serious economic downturn, an independent report showed late on Friday, matching market expectations. The country is expected to need international help to meet its debt financing needs. The euro gained 0.4 percent to $1.2904 helped also by better-than-expected U.S. data which dented demand for the safe-haven U.S. dollar. Investors also sold the U.S. currency on concern the Federal Reserve's decision last month adopt another round of bond buying would dilute the value of the dollar. Investors were awaiting the outcome of credit agency Moody's review of Spain's sovereign debt rating. Europe's fourth largest economy may be downgraded to junk status, piling pressure on it to seek an international bailout soon. "A downgrade could force Spain's hand in seeking a bailout and should see a relief rally in the euro," said Adam Myers, senior foreign exchange strategist at Credit Agricole. "But until that happens, weak economic data will add to the downward pressure on the euro." The dollar was up 0.2 percent at 78.08 yen. The benchmark 10-year U.S. Treasury note was down 2/32, with the yield at 1.6404 percent. Brent crude oil extended gains after U.S. data, before retreating to last trade 28 cents lower at $112.05. rose 41 cents to trade at $92.61. "While cyclical activity indicators still paint the picture of a weak recovery, a turn is starting to become evident... Further interest rate cuts and looser fiscal policies will also boost confidence into year-end despite event risk around the U.S. fiscal cliff," said analysts from Merrill Lynch, who expect Brent to hit $120 per barrel before year-end. Spot gold prices rose slightly to about $1,775 an ounce. Link this Share this Digg this Email Reprints

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