Global shares rally to three-month high on hopes for U.S. budget deal

NEW YORK Wed Dec 19, 2012 3:14am IST

1 of 3. Traders work on the floor of the New York Stock Exchange, December 14, 2012.

Credit: Reuters/Brendan McDermid

Stocks

   

NEW YORK (Reuters) - Global stocks advanced to their highest levels since September on Tuesday on signs of compromise in U.S. talks to stop automatic tax hikes and spending cuts that could hurt the economy next year.

With confidence rising that lawmakers would avert the "fiscal cliff," investors shifted funds to stocks and the euro and pulled away from assets traditionally viewed as safe harbors like bonds, gold and the U.S. dollar. The euro hit a 7-1/2 month high against the greenback while gold fell almost 2 percent to its lowest since August.

Wall Street rallied on strong volume, capping off the S&P 500's best two-day run in a month, on confidence that a deal would be struck in Washington to avoid painful spending cuts and tax hikes.

Banking, energy and technology - sectors that would benefit during economic expansion - led gains as investors were confident that lawmakers will come to an agreement to avoid the end-of-year deadline.

The PHLX oil services sector index .OSX jumped 3.1 percent, with eight of its 15 components up 3 percent or more.

"The view is that the economy is getting better, and that is always good for energy demand," said Shawn Hackett, president at Hackett Financial Advisors in Boynton Beach, Florida.

Hackett said the United States would avoid "whatever the 'cliff' means" for the economy, allowing investors to focus on growth.

President Barack Obama's most recent offer to Republicans in the ongoing budget talks makes concessions on taxes and social programs spending. House Speaker John Boehner said the offer is "not there yet," though he remains hopeful about an agreement. Senate Democrats, however, have expressed concern about cuts to Social Security.

For a second day, banks led the rally on Wall Street. Goldman Sachs Group (GS.N) was up 3.5 percent and Morgan Stanley (MS.N) gained 3.2 percent after Jefferies Group JEF.N reported a higher-than-expected adjusted quarterly profit. Jefferies was up 3 percent to $18.80. The S&P 500 Financial Index .GSPF climbed 1.5 percent.

The Dow Jones industrial average .DJI closed up 115.57 points, or 0.87 percent, at 13,350.96. The Standard & Poor's 500 Index .SPX was up 16.43 points, or 1.15 percent, at 1,446.79. The Nasdaq Composite Index .IXIC was up 43.93 points, or 1.46 percent, at 3,054.53.

European shares ended higher, with a key index closing just a few points below its 2012 high.

The euro rose against the dollar for a seventh straight session on Tuesday, hitting its highest level in more than seven months.

The euro was last up 0.5 percent at $1.3224 after hitting a high of $1.3238, its strongest level since early May. The dollar index .DXY fell to a two-month trough of 79.260. The index was last quoted at 79.342, down 0.3 percent.

Oil prices rose. Front-month Brent crude oil prices rose $1.20 to settle at $108.84 a barrel, briefly topping the 14-day moving average of $108.87 a barrel.

January U.S. crude oil futures gained 73 cents to settle at $87.93 a barrel, breaking above the 50-day moving average of $87.64 a barrel after testing that level during Monday's trade.

Among other assets, gold, seen as a safe haven, tumbled, with spot gold down 1.9 percent at $1,666.90 an ounce.

U.S. Treasury yields rose to their highest since October. The benchmark 10-year U.S. Treasury note was down 15/32, with the yield at 1.824 percent.

(Reporting by Angela Moon; Editing by Dan Grebler)

REUTERS SHOWCASE

Oil Prices Fall

Oil Prices Fall

Brent near four-year low after OPEC decides against output cut  Full Article 

Banking Sector

Banking Sector

India says considering plan to reduce stake to 52 pct in state banks   Full Article 

Islamic Fund

Islamic Fund

India gets new Islamic equity fund but debt market still off-limits  Full Article 

SAARC Summit

SAARC Summit

Summit salvaged after handshake by leaders of India, Pakistan  Full Article 

Social Media

Social Media

Twitter to start tracking users' mobile apps  Full Article 

Forever21 in India

Forever21 in India

Forever21 sets sights on Indian cities, but please hold the hot pants  Full Article 

Japan Economy

Japan Economy

Japan inflation slows in October, output and spending show signs of recovery  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage