August 21, 2012 / 7:52 AM / in 5 years

GLOBAL MARKETS-Global stock rally continues on ECB, Greece optimism

* Top euro shares stride to 13-month highs on ECB hopes
    * Euro hit 2-week high vs dollar but dollar eases vs yen
    * Gold firms, oil drifts sideways
    * Spain sees healthy auction of shorter-term debt

    By Marc Jones
    LONDON, Aug 21 (Reuters) - Rallying European markets lifted
global stocks to a 3-1/2 month high on Tuesday, on hopes that
meetings on Greece's future this week and new crisis plans being
drawn up by the European Central Bank will see the euro zone
master its debt problems.
    European shares, which have risen 16 percent since
June, were up 0.4 percent at a 13-month high ahead of what was
expected to be a positive open on Wall Street. 
    After modest rises in Asia it left the MSCI global share
index up 0.4 percent at 1200 GMT,  
 while the euro hit a two-week high of $1.2398 versus the
dollar and climbed further against the yen and sterling.
    "The dollar is weaker versus the euro ahead of the key
meetings this week that may provide clarity on both the
immediate outlook for Greece and the outlook in regard to the
ECB's plan to buy sovereign bonds," said Derek Halpenny of Bank
of Tokyo Mitsubishi. "That optimism is persisting today."
    U.S.-focused investors may remain cautious ahead of
Wednesday's publication of minutes from the most recent Federal
Reserve meeting where it gave little hint of imminent addition
policy easing.
    The S&P 500 has gained nearly 3 percent so far in August. 
S&P 500 futures rose 3.2 points ahead of the open, Dow
Jones industrial average futures rose 24 points, and
Nasdaq 100 futures added 9 points.
    Hard hit Facebook shares will be in the spotlight
again, however, after it was revealed director Peter Thiel sold
roughly $400 million worth of shares last week, cashing out most
of his stake in the social networking firm. 
    
    ECB HOPES 
    Stock markets have enjoyed a red-hot run over the last few
weeks on hopes that the new urgency in Europe to overcome its
2-1/2 year debt crisis may allow Greece to remain in the euro
and keep the 17-member bloc from unravelling.  
    Greek Prime Minister Antonis Samaras will meet German
Chancellor Angela Merkel, French President Francois Hollande and
Eurogroup chief Jean-Claude Juncker in the coming days to try to
secure more funding from the European Union, International
Monetary Fund and ECB, even though Greece has fallen behind on
its debt-cut targets.
    Investors are primarily looking for clues on plans the ECB
is due to detail at the start of September. These are expected
to involve heavy Spanish and Italian bond buying if Madrid and
Rome admit themselves into fiscal rehabilitation programmes.
    The ECB poured cold water on a report over the weekend that
it was considering capping inflamed borrowing costs by buying
those countries' bonds if they breached a certain level.
Nevertheless hopes for the plans remain high.   
  
         
    SPAIN GAIN 
    Rating firm Moody's released a report saying that repair
programmes in troubled southern euro zone countries were having
a significant benefit, although overcoming the problems could
take several more years. 
    Bond markets remained in upbeat mood after Spain saw a drop
in its borrowing costs at an auction of shorter-term, 12-18
month debt. 
    With the appetite for riskier assets slowly re-emerging,
German government bonds, traditionally favoured by risk-shy
investors, waned in morning trading. They were outstripped by
Italian, Spanish and other debt-strained countries' paper.
    Portugal also benefited from the ECB glow as its 10-year
borrowing costs fell below 9.5 percent for the
first time since it was forced to take a bailout early last
year.    
    "We expect Spain to continue outperforming Italy, especially
in the short end, on continued expectations of ... EFSF and ECB
support," RBS strategists said in a note, referring to the
European Union's bailout fund and the euro zone's central bank.
    In other markets, oil drifted within its recent range,
underpinned by supply concerns triggered by escalating conflicts
in Syria and Yemen as well as by Iran's dispute with Israel, the
United States and Europe. 
    Gold prices firmed as investors sought a counterbalance to
the prospect of additional monetary stimulus. Platinum prices
hovered just below a two-month peak as concerns over unrest at
mines in top producer South Africa festered.
    One piece of gloomier news came from Britain where public
sector finances showed an unexpected deterioration.
 "It probably means come November the government
is going to have to announce further fiscal tightening," said
Gustavo Bagattini at RBC Capital Markets.

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