Euro climbs on hope debt crisis fix is near
New York, June 4, 2012
The euro climbed and bonds eased off last week's record low yields on Monday as speculation mounted that authorities will manage to keep the euro zone intact and ameliorate the region's festering debt crisis.
Wall Street opened higher, helping to briefly lift shares in Europe, but stock markets on both sides of the Atlantic were soon lower. MSCI's emerging market index was down more than 1 percent. Investors have speculated there could be some new plan or action to work through the debt crisis and keep Greece in the euro zone before a European Central Bank policy-maker said he supported the idea of a European banking union.
Potential monetary easing may come from a European Central Bank meeting on Wednesday, as some investors positioned for an outside chance of a rate cut. Factory prices held steady in the euro zone in April, giving the ECB some room to cut rates.
"They (the ECB) have made it clear that they want the solution to come from Europe's leaders but the recent deterioration in economic data and slide in asset prices makes easier monetary policy inevitable," said Kathy Lien, director of currency research at GFT in Jersey City, New Jersey.
The euro was 0.5 percent higher at $1.2495, off of lows last seen in July 2010 that it hit on Friday.
Traders took profits in safe-haven U.S. and German debt, wary that a policy response to the euro zone's debt crisis might be in the works.
"It's relatively difficult to be positive on these developments," said Marius Daheim, senior fixed-income analyst at Bayerische Landesbank. "But we haven't given up because the past has also taught us that European politicians usually move when things become really dangerous. I think we are quickly moving towards this point."
The benchmark 10-year U.S. Treasury note was down 15/32, with the yield at 1.5071 percent. Prices on the 10-year German bond fell, and its yield rose 1.224 percent. New orders for US factory goods fell in April for the third time in four months as demand slipped, the latest worrisome sign for the economic recovery.
The Commerce Department said orders for manufactured goods dropped 0.6 percent, and the government also revised its estimate for new orders in March to show a steeper decline. Economists had forecast orders rising 0.2 percent in April. Stocks fell.
On Wall Street, the Dow Jones industrial average was down 1.06 points, or 0.01 percent, at 12,117.51. The Standard & Poor's 500 Index was down 1.04 points, or 0.08 percent, at 1,277.00. The Nasdaq Composite Index was up 6.68 points, or 0.24 percent, at 2,754.16.
In thin European markets, the FTSE Eurofirst 300 index of top shares was down 0.2 percent at 953.32 points. The MSCI world equity index was down 0.3 percent at 291.19 points. Brent crude fell 62 cents to $97.81 a barrel. US crude rose 10 cents to $83.33 a barrel. - Reuters