August 21, 2012 / 2:17 PM / 5 years ago

GLOBAL MARKETS-Stocks, euro soar on ECB optimism

* Wall Street climbs to four-year high on ECB hope
    * Euro rallies to seven-week high versus dollar
    * Spain sees healthy auction of shorter-term debt


    By Wanfeng Zhou
    NEW YORK, Aug 21 (Reuters) - Global stocks rallied to
3-1/2-month highs on Tuesday and the euro hit a seven-week peak
against the U.S. dollar on hopes the European Central Bank will
soon start buying Spanish and Italian bonds to contain the debt
crisis.
    Spanish borrowing costs fell and Portuguese government bond
yields hit levels seen before it agreed on a
bailout deal, with traders citing a media story over the weekend
that the ECB was drawing up detailed plans about bond-buying.
    U.S. stocks opened higher, with the S&P 500 index hitting a
four-year high as equity markets continue to grind steadily
higher on hopes that central banks will act in the near future
to stimulate their economies. 
     "I am looking for new highs in the major indexes," said
Wayne Kaufman, chief market analyst at John Thomas Financial in
New York. "Overall there is no one major negative that's out
there right now that people are scared of."
    The MSCI global share index rose 0.6 percent
to 327.29. European shares advanced 0.1 percent.
    On Wall Street, the Dow Jones industrial average was
up 20.85 points, or 0.16 percent, at 13,292.49. The Standard &
Poor's 500 Index was up 4.33 points, or 0.31 percent, at
1,422.46. The Nasdaq Composite Index was up 13.12
points, or 0.43 percent, at 3,089.33.
    Yields at a Spanish short-term debt auction dived on
Tuesday, while Europe's volatility index VSTOXX hit a
one-month low, signaling a steady rise in investors' appetite
for risk. 
    The ECB sought to quell speculation 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.  
    Financial markets have also 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.
    The euro rallied 1 percent to $1.2464, while the
dollar slipped 0.1 percent to 79.33 yen.
     "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."
    Brent crude oil rose $1.33 at $115.03 a barrel, and
has jumped from below $90 at the end of June, propelled by
maintenance in the North Sea and increased fear of military
conflict between Iran and Israel.
    U.S. crude added $1.23 to $97.20 per barrel.

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