Europe measures aid stocks

By Albert H. Yoon

NEW YORK (BestGrowthStock) – World shares climbed on Wednesday after Spain outlined measures to cut its deficit, easing fears that the Greek debt crisis could spread in Europe, but doubts about the longer-term impact drove down the euro and sent gold to record levels.

MSCI’s all-country world stock index (.MIWD00000PUS: ) climbed nearly 1.2 percent, led by Europe, where the FTSEurofirst 300 (.FTEU3: ) index gained 1.3 percent.

Concerns that a debt crisis in Greece could spill over to other euro-zone nations with high borrowings eased on Wednesday as Spanish Prime Minister Jose Luis Rodriguez Zapatero said Madrid would slash civil service pay by 5 percent this year, freeze it in 2011 and cut 13,000 public sector jobs.

“There was some concern about whether Spain would be serious about the measures it would have to take, so the moves it’s making” are positive, said John Massey, portfolio manager at SunAmerica Asset Management in Jersey City, New Jersey.

Massey said cyclical companies with a lot of international exposure, including those in the tech and industrial sectors, had been especially vulnerable to the issues in Europe. Those shares were among leaders on Wednesday.

Doubts about the longer-term prospects for debt-laden European countries, however, persisted, and worries about euro-zone growth also cast a cloud.

Gold hit a record high as investors sought assets seen as havens from global instability, touching a $1,248.15 peak that marked a 19.5 percent gain from February. Spot gold rose $5.60, or 0.45 percent, to $1237.60.

The Dow Jones industrial average (.DJI: ) surged 148.65 points, or 1.38 percent, to 10,896.91. The Standard & Poor’s 500 Index (.SPX: ) rose 15.88 points, or 1.37 percent, to 1,171.67 and the Nasdaq Composite Index (.IXIC: ) added 49.71 points, or 2.09 percent, to 2,425.02.

The gold rally drove up shares of materials companies. The PHLX gold and silver index (.XAU: ) gained 0.98 percent, while Freeport-McMoRan Copper and Gold Inc (FCX.N: ) shares jumped 3.9 percent to $73. Technology and industrial shares also rose.

As investors shift attention from Europe’s sovereign debt troubles, the focus will return to the U.S. economic recovery, though analysts predict choppy trading.

“The market has been increasingly conditioned to buy on the dips now that the situation in Europe has been not resolved but certainly stabilized in the short term,” said Craig Peckham, equity trading strategist at Jefferies & Co in New York.

EURO SHEDS GAIN

The pan-European FTSEurofirst 300 (.FTEU3: ) index of top shares closed up 1.3 percent at 1,048.56 points. The index is now up 0.3 percent for the year having dipped into negative territory in early May on euro-zone sovereign debt concerns.

Financials were among the top gainers following drops in previous sessions. Germany’s Allianz jumped 3.4 percent after first-quarter profit (Read more your timing to make a profit.) more than tripled.

The euro declined 0.28 percent at $1.2617. The battered currency rose earlier after Spain announced its austerity measures and data showed the euro-zone economy grew modestly in the first quarter.

Germany’s GDP grew for the fourth consecutive quarter in the first three months of 2010, data showed on Wednesday.

Gains in the euro were short-lived, reflecting investor worry over whether weaker euro-zone economies can deliver debt cuts and the draining impact of austerity measures on Europe’s growth.

The dollar rose against a basket of major trading-partner currencies, with the U.S. Dollar Index (.DXY: ) up 0.48 percent at 84.87. Against the Japanese yen, the dollar gained 0.47 percent at 93.12 yen.

U.S. Treasuries prices fell as the euro zone’s attempts to staunch its budget crisis helped stabilize stock markets and traders braced for a 10-year bond auction.

Investors must absorb $78 billion of U.S. Treasury bonds in auctions this week, including $24 billion of 10-year notes that drew solid demand on Wednesday. Ten-year Treasury note yields rose 0.05 percentage point to 3.58 percent.

“People like to see that fiscal responsibility talk coming out of Europe, but I think it’s more that we’re watching equities and they’re stable and we have a lot of supply,” said Rick Klingman, managing director of Treasury trading at BNP Paribas in New York.

Britain’s FTSE 100 (.FTSE: ) index was up 0.9 percent as Conservative leader David Cameron took the position of prime minister at the head of a coalition government.

Germany’s DAX (.GDAXI: ) increased 2.4 percent and France’s CAC 40 (.FCHI: ) rose 1.1 percent.

In energy and commodity trading, U.S. light sweet crude oil fell 94 cents, or 1.23 percent, to $75.43 per barrel.

Stock Market Report

(Additional reporting by Jeremy Gaunt and Joanne Frearson in London, and Rodrigo Campos, Burton Frierson and Wanfeng Zhou in New York; Editing by Dan Grebler)

Europe measures aid stocks