Reuters: US Dollar Report: GLOBAL MARKETS-Shares, euro climb on Spain bailout hope

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GLOBAL MARKETS-Shares, euro climb on Spain bailout hope Oct 2nd 2012, 14:58 Tue Oct 2, 2012 10:58am EDT * Expectations grow Spain will request bailout * Gold holds near highest of the year; euro gains * Aussie dollar slips as RBA cuts rates By Wanfeng Zhou NEW YORK, Oct 2 (Reuters) - Global shares edged higher on Tuesday while the euro advanced on expectations Spain will soon request a bailout seen as necessary to resolve the euro zone debt crisis, but uncertainty about the timing of the aid limited gains. Spain's borrowing costs fell after European officials said on Monday that Madrid is ready to make the request as early as next weekend although Germany has signalled that it should hold off. A request for a bailout is viewed as positive for financial markets because it would trigger Spanish bond buying by the European Central Bank that would lower the country's borrowing costs. It also removes another layer of uncertainty in the region's three-year old debt crisis. "(Spain's) recent budget proposal...seemed intentionally designed with a bailout request in mind and the market is assuming it's just a question of when," said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut. "The sooner the better for markets as every hint of a looming request sends markets higher." The MSCI global stock index rose 0.2 percent to 334.03. Wall Street stocks were little changed. The Dow Jones industrial average dropped 1.03 points, or 0.01 percent, to 13,514.08. The Standard & Poor's 500 Index gained 4.16 points, or 0.29 percent, to 1,448.65. The Nasdaq Composite Index gained 16.82 points, or 0.54 percent, to 3,130.36. The FTSEurofirst-300 index of pan-European shares edged up 0.1 percent to 1,105.54 points. Adding to the confusion about when aid could arrive, Spanish media reported that Spain's Prime Minister Mariano Rajoy has told party members he will not make a request this weekend. "It's difficult for markets to get any sense of direction when you have such contrasting comments coming out from Europe," said Alastair McCaig an analyst for spread betting firm IG. Yields on two-year Spanish bonds were 16 basis points lower at 3.25 percent, with their 10-year equivalent down 12 basis points at 5.77 percent. The euro rose 0.3 percent to $1.2927, while the dollar gained 0.1 percent to 78.04 yen. Investors also awaited a number of central bank meetings later this week. The European Central Bank, the Bank of England and the Bank of Japan all follow later this week although none are expected to move rates. Earlier on Tuesday, Australia's central bank cut its main rate by a quarter point to 3.25 percent. The Australian dollar fell to a one-month low of $1.0291 and last traded down 0.6 percent at $1.0298. It was the RBA's third cut in six months as the slowdown in China, a strong currency, soft export prices and benign inflation all slow its economy. U.S. Treasuries prices fell as speculation about Spain and an unexpected rate cut by Australia dented demand for safe-haven government debt. The benchmark 10-year Treasury note was down 2/32, yielding 1.6249 percent. "This sense of a better environment for risk assets is taking a small shine off rates," said John Briggs, Treasury strategist at RBS Securities in Stamford, Connecticut. "Australia eased, which wasn't particularly expected, so that gave the 'additional-stimulus-will-help-growth' crowd a bit of a boost," Briggs said. Brent crude rose 12 percent to $112.31 a barrel as investors weighed a weaker outlook for fuel demand and sluggish economic growth against the risk of possible supply disruptions because of tensions between Iran and the west. U.S. crude rose 2 cents to $92.50. Gold prices, which are seen as a safe haven asset, remained close to their highest level of the year. Spot gold was last at $1,776.19 an ounce. Link this Share this Digg this Email Reprints

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