NEW YORK: US stocks rose and the euro climbed to a four-month peak against the dollar yesterday after Germany's Constitutional Court approved the euro zone's new rescue fund, easing concerns about the region's debt crisis and leaving markets focused on prospective further easing by the Federal Reserve.
While the German court approval was made with some conditions, it was enough to boost global stocks and cut borrowing costs for Spain and Italy.
"Today's positive ruling from the court solidifies the view that European officials are getting control over the sovereign debt crisis," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
The euro climbed to $1.2936, its highest since mid-May. The euro zone common currency has risen more than 7 percent since it hit a two-year low of around $1.2040 in July, boosted after the European Central Bank's pledge to do whatever it takes to preserve the euro.
More gains are expected if the US central bank implements further monetary easing on Thursday. US stocks have been rallying in anticipation of further monetary ease.
The Federal Open Market Committee must decide whether to launch a third round of bond purchases to lower borrowing costs and breathe more life into an economy that is not growing fast enough to reduce unemployment.
"It's all kind of hinging on the Fed and which way the Fed chooses to go," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC.
If the Fed disappoints investors, cyclical stocks could suffer, he said.
The Dow Jones Industrial Average was up 23.97 points, or 0.18 percent, at 13,347.33. The Standard & Poor's 500 Index was up 3.14 points, or 0.22 percent, at 1,436.70. The Nasdaq Composite Index was up 4.54 points, or 0.15 percent, at 3,109.07.
The S&P 500 index has advanced more than 9 percent since the start of June on hopes for global central bank stimulus. But the index has been unable to significantly pierce the 1,438-1,440 level, seen by many analysts as a significant resistance point.
Facebook Inc. jumped 7.2 percent to $20.83 after Chief Executive Mark Zuckerberg hinted at new growth areas in his first major public appearance since the No. 1 social network's rocky IPO in May.
Brent crude oil prices edged up 0.12 percent to $115.54 a barrel.
"More monetary liquidity plus geopolitical risk equals higher oil prices despite fundamentals like weaker manufacturing and demand," said Kimberly DuBord, director of research at Briefing Research in Chicago.
European stocks touched a 14-month high and the MSCI global share index, up 6.5 percent since the end of July, hit a five-month high of 332.42 before dipping back to be up 0.4 percent at 331.82 as profit-taking set in.
The German constitutional court's ruling damped demand for safe-haven assets like US Treasuries and German bunds. That led to more tepid demand for the US Treasury's $21 billion auction of 10-year notes yesterday.
The benchmark 10-year Treasury note fell 16/32 in price, its yield rising to 1.76 percent from 1.71 percent late on Tuesday.
Bund futures fell to their lowest since July.
FROM: REUTERS
Euro rises to four-month high
