Greece bailout hopes spur stocks, euro higher

By Daniel Bases

NEW YORK (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) and the euro on surged Tuesday on reports that euro zone countries decided in principle to come to the aid of debt-laden Greece, whose fiscal problems have soured risk appetite.

The euro posted its biggest gain against the dollar in more than two months and the Dow industrials had their biggest one-day percentage gain in three months.

A spokesman for the German government, however, later denied as unfounded reports that various options were being considered to help Greece regain its fiscal footing and limit financial contagion, trimming the euro’s gains against the dollar.

The denial, however, failed to seriously dent the positive sentiment.

“In an environment where the market was increasingly leaning toward the ‘the inevitable, i.e. the bailout as a matter of timing and not probability, the news was almost accepted as a fait compli,” said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

The greenback’s drop helped lift spot gold prices 1.31 percent and crude oil gained 2.59 percent.

European Union leaders will hold a special summit on the economy on Thursday in Brussels amid the increasing worries that Greece and other so-called peripheral euro zone economies, including Spain and Portugal, cannot handle their debts and deficits.

The EU’s economic and monetary affairs commissioner, Joaquin Almunia, said the situation in Greece was difficult and a common concern for the EU.

The Dow Jones industrial average (.DJI: ) rose 150.25 points, or 1.52 percent, to 10,058.64. The Standard & Poor’s 500 Index (.SPX: ) added 13.78 points, or 1.30 percent, to 1,070.52. The Nasdaq Composite Index (.IXIC: ) gained 24.82 points, or 1.17 percent, to 2,150.87.

Oil company stocks rose along with the price of crude, with Chevron (CVX.N: ) gaining 1.9 percent to $71.45

“Everyone expects there to be some assistance out of the EU to help Greece, and that’s what’s giving the market a boost,” said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut.

Stocks in Europe, however, missed out on much of the Greek developments and closed flat after having gained early on thinner speculation about a bailout for the fiscally strapped euro zone member.

In Europe, the FTSEurofirst 300 (.FTEU3: ) rose 0.17 percent to 979.33, with banks among the top gainers. The pan-European index is down 6.37 percent year-to-date.

EURO INFLUENCE

Spreads between German 10-year bonds and Greek and Portuguese equivalents narrowed, although they remained wide at 320.5 and 144.9 basis points, respectively.

The euro climbed 1 percent at $1.3787 and against the yen it rose 1.35 percent to 123.54 yen.

“If they do come and help Greece, (that) would do it for now. It would help bring the euro back from the multi-month lows,” said Greg Salvaggio, senior vice president for capital markets at Tempus Consulting in Washington.

The dollar was down 0.65 percent against a basket six major currencies (.DXY: ).

The euro is down 4.0 percent versus the dollar year-to-date and over 7.5 percent against the yen, in part because of concerns over debt.

Spot gold hit a session high of $1,083.05 an ounce and was bid at $1,076.70, up 1.31 percent. Crude oil prices settled up 2.59 percent at $73.75 a barrel.

Benchmark 10-year U.S. Treasuries fell 19/32 of a point in price, pushing the yield up to 3.64 percent. Some of the weakness was blamed on average demand for the government’s $40 billion three-year note auction.

World stocks as measured by MSCI (.MIWD00000PUS: ) rose 0.89 percent, lifted mainly by gains of 1.63 percent in their emerging market component. Chinese and Hong Kong shares were generally higher, cheered by higher commodity prices.

Japan’s Nikkei Nikkei (.N225: ) edged down 0.2 percent to a two-month closing low.

Toyota Motor Corp (7203.T: ), whose shares have lost about a fifth of their value since late January, rose on short-covering with investors welcoming signs it was taking steps to deal with its safety problems.

Investment Advice

(Additional reporting by Gertrude Chavez-Dreyfuss, Emily Flitter, Tom Ryan and Caroline Valetkevitch in New York; Jeremy Gaunt, Atul Prakash and Neal Armstrong in London; Marcin Grajewski in Strasbourg; Editing by Leslie Adler)

Greece bailout hopes spur stocks, euro higher