EU progress as U.S. growth prospects lifts stocks

By Alina Selyukh

NEW YORK (BestGrowthStock) – World stocks ended slightly higher, U.S. bond yields slipped, and the euro was firmer on Thursday after European leaders agreed to change the EU treaty to create a permanent financial safety net.

More signs the U.S. economic recovery was gaining traction and progress in Congress on passing President Obama’s tax plan also relieved uncertainty in securities markets.

“Recent events do bode well for positive economic sentiment, said James Barnes, portfolio manager at National Penn Investors Trust Co in Wyomissing, Pennsylvania.

The Dow Jones industrial average (.DJI: ) gained 41.78 points, or 0.36 percent, to 11,499.25. The Standard & Poor’s 500 Index (.SPX: ) rose 7.64 points, or 0.62 percent, to 1,242.87, and the Nasdaq Composite Index (.IXIC: ) climbed 20.09 points, or 0.77 percent, to 2,637.31.

U.S. stocks (Read more about the stock market today. ) were also buoyed by a bullish forecast by FedEx Corp (FDX.N: ) which is deemed an economic bellwether. The package shipping firm reported unexpectedly strong holiday volumes despite lower-than-expected quarterly profit and revenue, sending its shares up almost 2.0 percent.

Although worries about the EU credit troubles weighed on sentiment, the FTSEurofirst 300 (.FTEU3: ) index of top European shares tested this week’s 26-month highs and closed 0.4 percent higher.

“The risk of contagion continues to play on investors’ minds and that is certainly one of the biggest macro risks that you can point to as you look toward 2011,” said Henk Potts, equity strategist at Barclays Wealth.

“But the corporate picture still looks very bright, the trend toward higher profits continues and public policy should remain shareholder-friendly. The name of the game is to try and hold onto the gains seen over the past couple of weeks.”

The MSCI’s all-country world stock index (.MIWD00000PUS: ) ended up 0.07 percent and the Thomson Reuters global stock index (.TRXFLDGLPU: ) was up 0.5 percent at market close in New York.

Stocks in Tokyo were seen opening slightly lower on Friday though, with the December futures contract that trades in Chicago for the Nikkei 225 flat at 10,375.

EURO ZONE CREDIT RISKS STILL EYED

Worries over European sovereign debt saw euro zone bond yields rise after Spain paid a hefty premium at its final bond auction of the year.

Moody’s, which put Spain on credit downgrade watch on Wednesday, made a similar announcement on Greece on Thursday, saying it may take Greece’s already “junk” credit rating down if the country didn’t stabilize its finances.

However, the European Central Bank moved to increase its financial firepower to fight the euro zone debt crisis on Thursday, and European leaders agreed to change the EU treaty to create a permanent financial safety net.

U.S. Treasury yields ended lower but not before testing new seven month highs as investors took profits on positions taken ahead of the Federal Reserves new bond purchase program in November.

Ten-year notes were last up 20/32 in price to yield 3.44 percent, down from 3.52 percent late on Wednesday.

The euro rose against the U.S. dollar, but remained vulnerable to selling, traders said, despite moves by European leaders to establish a permanent mechanism to resolve sovereign debt problems.

“Market participants continue to reduce exposure to the euro,” said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston.

“The ongoing policy discord about measures required more urgently to tackle contagion is spooking investors,” he said.

The euro rose 0.2 percent to $1.3236 after falling to a session trough of $1.3181 on trading platform EBS.

With the euro gaining, the dollar also slipped against a basket of major trading-partner currencies (.DXY: ), shedding 0.25 percent to 80.064. Against the Japanese yen, the dollar declined 0.27 percent to 84.02.

Greater confidence about the global economy sent spot gold prices down $9.60, or 0.70 percent, to $1369.80. Similarly, U.S. crude oil dipped 0.82 percent, to $87.89 per barrel.

(Additional reporting by Ryan Vlastelica, Karen Brettell, Wanfeng Zhou, Ellen Freilich and Leah Schnurr in New York, and Emily Flitter, William James, and Jan Harvey in London)

EU progress as U.S. growth prospects lifts stocks