Euro rises on ECB talk, earnings buoy Dow

NEW YORK (Reuters) - The euro rose against the dollar for the first time in six days on Wednesday after suggestions that European policymakers will consider new ways to tackle the region's debt crisis, while U.S. earnings supported blue-chip stocks.

Higher 2012 profit forecasts from big manufacturers Caterpillar and Boeing and an outlook for quarterly revenue growth from chipmaker Broadcom helped to offset news of an unexpected drop in new U.S. home sales.

On Wall Street, the Dow snapped a three-day losing streak and the S&P and Nasdaq slipped only modestly, even as shares of Apple Inc, the world's most valuable publicly traded company, fell 4.3 percent to $574.97 after it posted a rare miss in revenue late on Tuesday.

"I'm encouraged investors are taking the Apple news pretty well," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

Ablin said after a more than 40 percent rise in Apple shares this year, Wednesday's drop is but a speed bump, adding that the raised outlooks from Dow components Caterpillar and Boeing "is a huge positive for the market."

The Dow Jones industrial average rose 58.73 points, or 0.47 percent, to 12,676.05. The S&P 500 Index dipped 0.42 point, or 0.03 percent, to 1,337.89. The Nasdaq Composite Index fell 8.75 points, or 0.31 percent, to 2,854.24.

The euro rose 0.8 percent to $1.2156, although the outlook remains weak and it remained only just above a two-year low of $1.2042 hit Tuesday.

A member of the European Central Bank's Governing Council, Ewald Nowotny, said there were arguments for giving Europe's new permanent rescue fund a banking license, enabling it to borrow unlimited central bank money and boosting its capacity to prevent the euro zone debt crisis from spreading.

Analysts said the market may have put too much emphasis on the comments, given other ECB officials' opposition to the idea. Investors would likely sell into the euro's rally, the analysts said.

"The market is grasping for any positive news," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, D.C. "It adds to the already somewhat improved tone. Whether or not it lasts is the question."

Market support from central banks has been expected for weeks as economic data sags globally. Weak readings on Britain's gross domestic product and on a German business sentiment survey added to worries about slowing growth.

FED TO ACT SOON?

Top Fed officials recently spelled out what measures they might take to boost growth and hiring. Fed action could come as soon as its policy meeting next week, on July 31-August 1.

"Right now in my view it's still Fed rhetoric, but enough to keep investors confident to take risk. I don't necessarily see tangible action. I think the Fed is afraid to take action, fearful the market could shrug it off," Ablin said.

Despite a sluggish recovery and a suggestion by some analysts that the U.S. economy may already be in recession, the S&P 500 hit its highest level in 2-1/2 months last week.

The MSCI world equity index was flat on Wednesday, but has fallen 2.4 percent so far this week as concerns about the impact of Europe's problems on growth spread across the world.

U.S. dollar-denominated Nikkei futures rose 0.1 percent in choppy trading. The pan-European FTSEurofirst 300 index closed 0.07 percent lower.

Further supporting the euro, Spain and France said that a single supervisory mechanism for the bloc's banks needs to be adopted by the end of the year.

ECONOMIES SAG

The gains in the euro came despite the weak economic data from Germany and the UK, which reinforced the view that even Europe's biggest economies were being damaged by the debt crisis.

German business sentiment dropped in July for the third straight month to its lowest level in over two years, according to the latest survey by the Munich-based Ifo think tank.

British economic output also shrank much more than expected in the second quarter, hit by the euro zone debt crisis and government austerity, official data showed.

Greece was also back in the headlines with inspectors from the EU, ECB and International Monetary Fund in Athens to decide whether to keep it hooked up to a 130 billion euro lifeline or let it face default.

Three EU officials have said the team was likely to conclude Greece cannot repay what it owes, making a further debt restructuring necessary, but no decision is expected until at least September.

The benchmark 10-year U.S. Treasury note was down 3/32 in price, with the yield at 1.4008 percent after earlier rising as high as 1.44 percent. The yield hit an all-time low on Tuesday.

Gold futures rose more than 2 percent as expectations of U.S. and European monetary stimulus strengthened its appeal as an inflation hedge. Gold futures were last up 2 percent at $1,608 an ounce.

(Additional reporting Nick Olivari; Editing by Kenneth Barry and Leslie Adler)

Source: http://news.yahoo.com/global-shares-fall-intensifying-worry-over-spain-003611096--finance.html

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