Stocks and the euro rebounded on Friday, with sentiment over Europe improving as Spain worked on reforms and was expected to seek a bailout package soon that could resolve its debt problems.
Spain is considering freezing pensions and speeding up a planned rise in the retirement age as it races to cut spending and meet conditions of an expected international sovereign aid package, sources with knowledge of the matter said. However, the Spanish deputy prime minister later denied the Reuters report.
Oil prices, meanwhile, rose on supply worries arising from the geopolitical situation in Libya and lower North Sea production. Brent climbed 1 per cent above $111 a barrel.
Concerns over the Euro zone’s debt crisis have kept markets in check this past week, with investors worrying that Spain might not seek a bailout package. That would call into question the country’s ability to deal with its debt.
“The problems are very big (in Spain and Europe in general), it’s possible this is the beginning of the workout of the situation. It certainly takes some pressure off,” said Rick Meckler, president LibertyView Capital Management in New York.
The report of Spanish reform boosted sentiment. US stocks rose 0.2 per cent, while European shares closed up 0.4 per cent and the MSCI global index climbed 0.5 per cent. The expiration of options contracts could spur some volatility later in the US session.
US equities were also boosted by Apple Inc, the most valuable US company, which debuted the latest version of its iPhone worldwide. Its shares rose 0.8 per cent to $704.54. The euro was up 0.15 per cent at $1.2988, having briefly climbed back above the psychologically important $1.30 mark. The dollar fell 0.1 per cent against a basket of currencies, with the its index at 79.348, bringing it closer to a six-and-a-half month low of 78.601 hit last week .
Gold prices hovered at a 6-1/2 month high, rising 0.2 per cent to $1,770.76 an ounce.
With Friday’s gains, the S&P is flat for the week, but year to date the benchmark index has risen 16 per cent, boosted by concerted central bank economic stimulus measures. Investors have been looking for reasons to keep pushing equities higher after steep gains since June.
The Dow Jones industrial average was up 29.66 points, or 0.22 per cent, at 13,626.59. The Standard & Poor’s 500 Index was up 3.65 points, or 0.25 per cent, at 1,463.91. The Nasdaq Composite Index was up 13.65 points, or 0.43 per cent, at 3,189.61.
The euro, which has lost around 1.5 per cent since hitting a 4-1/2 month high a week ago, was up 0.15 per cent at $1.2988, having briefly climbed back above the psychologically important $1.30 mark.
The dollar fell 0.1 per cent against a basket of currencies, with the its index at 79.348, bringing it closer to a six-and-a-half month low of 78.601 hit last week in the wake of aggressive monetary easing by the US Federal Reserve.
With all eyes on whether Spain will call for aid, support for the euro was seen at Thursday’s low, which stood just above its 233-day moving average at $1.2915.
Markets brushed off a well-flagged report from the UK showing its plans to reduce its deficit have fallen behind target as the European debt crisis has hit global growth.
It followed Italy’s warning late on Wednesday that its recession will be far more severe than forecast, making it harder to reduce the country’s debt burden.
Underlining fears about faltering global growth, the World Trade Organization cut its global trade forecast to 2.5 per cent from 3.7 per cent on Friday.
In bond markets, the benchmark 10-year US Treasury note was down 2/32 in price, the yield at 1.7702 per cent as talk Spain might soon request a bailout was said to favor riskier assets.
Spain and Italy’s 10-year bond yields were slightly higher, although demand for German government bonds also eased, with December Bund futures 15 ticks lower at 140.15.
The ECB’s new plan, which requires struggling countries to submit to fiscal rehabilitation programs in order to qualify for bond-buying support in the open market, has been one of the key factors in the sharp drop in Italian and Spanish borrowing costs and the 15-20 per cent surge in major stock markets.
Gold prices hovered at a 6-1/2 month high, rising 0.2 per cent to $1,770.76 an ounce, supported by the ongoing lift from the recent aggressive moves from the Fed, ECB and the bank of Japan.
