Monday, November 29, 1999

Late rally lifts U.S. shares, euro up on debt sales

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U.S. stocks rose in a late rally on Thursday, overcoming weak economic data that added to worries about a fragile recovery, while European shares and the euro gained on reassuring demand for Spanish government bonds.A spurt of buying momentum in a choppy session drove gains as U.S. equities built on a break in the benchmark S&P 500 index above its 200-day moving average earlier this week.Prices for gold rose on a combination of safe-haven demand and the weaker U.S. dollar. Crude oil prices slipped on the disappointing economic data.A plunge in an index of factory activity in the U.S. mid-Atlantic region in June to its lowest level since August 2009 added to worries that a tepid U.S. economic recovery is fizzling.Higher-than-expected weekly claims for U.S. jobless benefits and the largest drop in U.S. consumer prices in nearly 1-1/2 years also weighed on U.S. shares and caused European shares to pare early gains.U.S. equities drove higher in the last 30 minutes of trade. The Dow Jones industrial average rose 24.71 points, or 0.24 percent, to close at 10,434.17. The Standard & Poor's 500 Index gained 1.43 points, or 0.13 percent, to 1,116.04. The Nasdaq Composite Index climbed 1.23 points, or 0.05 percent, to 2,307.16."I don't think that the buyers are willing to give up on the market just yet, we still have quite a bit of momentum," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.Apple Inc touched a lifetime high at $272.90 a day after the company said its new iPhone set a record sales pace with orders of more than 600,000. Apple shares ended up 1.7 percent at $271.87.But the list of winners was short. U.S. consumer discretionary shares were a drag on markets, with home goods retailer Bed, Bath & Beyond Inc down 7.6 percent to $41.70. The S&P retail index was off 1.25 percent.Consumer spending typically accounts for about two-thirds of U.S. economic activity, making the weak labor market a source of ongoing concern.U.S. consumer prices, click: U.S. jobless claims, click: Euro up on Spanish debt demand: shares closed higher for a seventh straight session on Thursday, even as the U.S. data diminished risk appetite.The FTSEurofirst 300 index of top European shares closed up 0.25 percent at 1,041.84 points as solid demand for Spain's auction of government bonds boosted investor confidence in the euro zone's economic outlook.Oil major BP Plc surged 6.7 percent a day after it said it will set up a $20 billion fund for damage claims from its huge Gulf of Mexico oil spill, sell assets and suspend dividend payments. The actions removed uncertainty over the dividend and the size of the funds to cover claims.Tony Hayward, BP's chief executive officer, was grilled on Thursday by U.S. lawmakers about the oil spill.Tokyo shares fell 0.7 percent from one-month highs, ending a five day winning streak for the benchmark Nikkei-225 index.EUROPEAN DEBT SALESThe euro rose against the dollar after Spain's ability to sell bonds soothed worries about the country's public finances and squeezed short positions by investors who had been betting against the single currency.The euro rose 0.64 percent versus the dollar to $1.2385 . The greenback also fell against the yen, down 0.48 percent to 90.98 yen as the weak U.S. data increased risk aversion.Spain's auction of 3.5 billion euros ($4.3 billion) worth of 10-year and 30-year government bonds drew strong demand, although it paid a hefty premium compared with previous issues of the same paper.While the debt succeeded in finding buyers, analysts remained cautious about Spain's funding prospects."Spain ... wanted to show it could issue paper without problems. But they paid a lot to get the paper away," said Huw Worthington, a bond strategist at Barclays Capital in London.The well-covered auction helped narrow the spread of Spanish yields over benchmark Bunds from an earlier euro lifetime high of 237 basis points.The spread snapped back after the auction and was last at 214 basis points."The strong demand for Spanish bonds should help restore confidence, said Ciaran O'Hagan, strategist at Societe Generale.The two-year Schatz yield was up 2.6 basis points at 0.528 percent, while the 10-year Bund yield was down 1.4 bps at 2.664 percent.Benchmark 10-year U.S. Treasuries rose 20/32 of a point in price, pushing the yield down to 3.19 percent .In commodities, spot gold prices rose $15.30, or 1.24 percent, to $1245.90. U.S. light sweet crude oil fell 88 cents, or 0.88 percent, to $76.79 per barrel.(Additional reporting by George Matlock, Kirsten Donovan and Natsuko Waki in London, Edward Krudy in New York; Editing by Leslie Adler)
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