August 17, 2012 / 2:47 AM / 6 years ago

Global stocks rise on German backing for ECB bond action

NEW YORK (Reuters) - Global shares edged higher and the dollar rose on Friday after apparent support from German Chancellor Angela Merkel for European Central Bank intervention to calm the euro zone’s debt troubles helped buoy investor sentiment for a second day.

Traders work at their desks in front of the DAX board at the Frankfurt stock exchange August 17, 2012. REUTERS/Remote/Amanda Andersen

U.S. stocks rose only slightly, but a key European index hit a 13-month high on speculation euro zone policy-makers might be closer to resolving their differences and working closely to tackle the more than two-year-old debt crisis.

Merkel’s comments on Thursday that ECB President Mario Draghi, who recently outlined conditional plans to buy bonds of troubled euro zone governments, were “completely in line” with European leaders came only shortly before the close of European markets.

Speaking in Ottawa, Merkel urged the bloc to move swiftly toward a closer integration of fiscal policies.

“It’s all about Europe and Merkel’s comments coming out, which appeared to support Draghi,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. “Unless the German constitutional court does something outrageous, we may be moving in the right direction here - at least in the short term.”

Germany’s constitutional court is expected to deliver a ruling on September 12 on the euro zone’s permanent rescue fund, before which Berlin cannot ratify the treaty on it.

European shares notched their best weekly run in seven years on Friday. The broad S&P 500 was less than 0.1 percent higher after posting its biggest gain in two weeks on Thursday, buoyed by Merkel’s comments and as economic data just beat economists’ expectations.

A gauge of U.S. consumer sentiment rose to its highest level since May.

The Dow Jones industrial average .DJI was up 8.71 points, or 0.07 percent, at 13,258.82. The Standard & Poor’s 500 Index .SPX was up 0.30 points, or 0.02 percent, at 1,415.81. The Nasdaq Composite Index .IXIC was up 3.25 points, or 0.11 percent, at 3,065.64.

The FTSEurofirst 300 index .FTEU3 closed up 0.5 percent at 1,109.53 points. The index earlier touched a 13-month high at 1,109.95 points. Benchmark indexes of Spain and Italy, the two euro zone countries at the top of radar screens on worries over the debt crisis, led regional gains, with Spain’s Ibex 35 .IBEX rising 1.9 percent and Italy’s FTSE MIB .FTMIB rising 1.3 percent.

World stocks as measured by MSCI’s all-country world equity index .MIWD00000PUS rose 0.1 percent at 325.43.

The euro extended losses versus the dollar after the Thomson Reuters/University of Michigan consumer sentiment survey rose to its highest level in three months in early August as sales at retailers and low mortgage rates spurred Americans to boost their buying plans.

The euro fell below $1.23 to hit a global session low of $1.2287. It last traded at $1.2311, down 0.3 percent on the day, according to Reuters data.

The dollar hit its highest level against the yen since mid-July at 79.57 yen and last traded at 79.54, up 0.3 percent on the day.

A preliminary reading of the Thomson Reuters/University of Michigan consumer sentiment survey it hit the highest level since May, at 73.6 from 72.3 in July, topping economists’ forecasts for a slight uptick to 72.4.

“Consumers are feeling a little better about the current economy, though a little more concerned about the outlook. Current conditions are at the highest level in about three years. That’s encouraging,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis.

Yields on U.S. Treasuries edged down from three-month highs but remained at the upper end of a recent trading range as investors lowered bets the Federal Reserve will launch a new bond purchase program when it meets next month.

The benchmark 10-year U.S. Treasury note was up 9/32 in price to yield 1.8035 percent.

Brent crude oil fell to around $114 after the United States said it was considering the possible release of oil reserves to dampen prices and Israel’s president spoke out against a lone Israeli attack on Iran.

Brent crude futures for October delivery fell more than 1 percent on talk of possible releases of U.S. strategic petroleum reserves and expectations that North Sea output will rebound after September production is curbed by maintenance.

Brent crude was down $1.55 to a low of $113.72 a barrel. U.S. crude oil was up 9 cents at $95.69 a barrel.

Additional reporting by Marc Jones in London; Editing by Dan Grebler and Leslie Adler

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