Global stocks rally on earnings

By Walter Brandimarte

NEW YORK (BestGrowthStock) – The euro hit a two-month high against the dollar on Tuesday as Greece successfully returned to the capital markets, while stocks rallied for the sixth straight session following a strong start for the U.S. earnings season.

Athens passed its first borrowing test by selling Treasury bills at a slightly lower yield than the 5 percent it pays under an emergency funding deal secured in May with the European Union and the International Monetary Fund.

The auction, worth 1.625 billion euros ($2 billion) in six-month Greek T-bills, was still more costly for Athens than a previous similar sale, underscoring future refinancing challenges for the debt-ridden country. Demand was also lower.

“It’s good for Greece and the euro, but (Greece) has a long way to travel, as its economic challenges are pretty severe,” said Paul Robinson, a currency strategist at Barclays Capital in London. “It’s going to take years to figure this out, not just one auction.”

Also reminding investors of weaker euro-zone members’ financial woes was a two-notch downgrade of Portugal’s credit ratings by Moody’s Investors Service.

The news had little impact on the euro, however, as investors said Moody’s was just catching up with rival Standard & Poor’s, which rates Portugal still two notches lower than Moody’s new rating.

The euro gained 0.98 percent to $1.2713 after hitting a session peak of 1.2739, its highest level in two months. The European single currency was also supported by hopes that companies will report strong second-quarter earnings on both sides of the Atlantic.

Optimism about this season’s earnings rose after Alcoa (AA.N: ), the first Dow component to report, posted second-quarter results late on Monday that beat expectations. Rail company CSX also posted a higher-than-expected profit.

After markets closed, Intel Corp (INTC.O: ) reported second-quarter earnings that beat investors’ expectations, supporting the positive market sentiment. Falling trading volumes suggest, however, that the rally could be running out of steam.

Investors have been eagerly awaiting the earnings season to start for confirmation that a recent stock rally was justified. The S&P 500 rose more than 5 percent last week, its best weekly performance of the year, despite rising fears in the past two weeks of a double-dip economic recession.

“It’s too early to call second-half demand because … Intel is the first one to report, but obviously earnings are off to a very bullish start,” said Patrick Wang, analyst with Wedbush Securities in New York.

World stocks measured by the MSCI All-Country World Index rose 1.46 percent, while the FTSEurofirst 300 (.FTEU3: ) index of top European shares jumped 1.92 percent, also its sixth consecutive session of gains.

The benchmark European stock index (Read more about the euro currency recovery. ) closed at a three-week high, with financial stocks among the top gainers. The STOXX Europe 600 banking index (.SX7P: ) rose 2.5 percent.

The Dow Jones industrial average (.DJI: ) ended up 146.75 points, or 1.44 percent, at 10,363.02 while the Standard & Poor’s 500 Index (.SPX: ) rose 16.59 points, or 1.54 percent, to 1,095.34. The Nasdaq Composite Index (.IXIC: ) climbed 43.67 points, or 1.99 percent, to 2,242.03.

Alcoa’s shares rose 1.2 percent in regular trading, while Intel jumped more than 5 percent in after-hours action.

TRADE DEFICIT WEIGHS ON DOLLAR

The U.S. dollar was also weaker against a basket of major currencies, with the U.S. Dollar Index (.DXY: ) down 0.80 percent after government data showed the U.S. trade deficit widened unexpectedly in May.

The greenback was also down 0.16 percent against the Japanese currency, at 88.48 yen.

“The dollar is getting hurt across the board today on a combination of things, including better earnings and a wider U.S. trade gap,” said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.

The good performance on equity markets also boosted commodity prices, with prices of U.S. crude oil jumping nearly 3 percent.

The August crude contract settled $2.20 higher at $77.15 a barrel, or 2.94 percent, its highest close since June 28.

U.S. Treasury prices slipped, on the other hand, as investors preferred to buy stocks and after a “mildly weak” auction of reopened 10-year notes, the second of this week’s three auctions worth a total of $69 billion.

Demand was also tepid for Monday’s offering of three-year notes. The benchmark 10-year U.S. Treasury note lost 14/32 in price, with the yield at 3.11 percent versus Monday’s close of 3.06 percent.

(Additional reporting by Alex Dobuzinskis, Ellen Freilich and Vivianne Rodrigues in New York; Editing by Philip Barbara)

Global stocks rally on earnings