Global stocks, euro gain on ECB move, Greece

NEW YORK: Global stocks advanced for a third straight day and the euro gained sharply on Thursday after the world's major central banks moved to ease funding for European banks having difficulties raising dollars.

In another move to alleviate Europe's debt crisis, sources said US Treasury Secretary Timothy Geithner will discuss with European finance ministers the possibility of leveraging the euro zone's bailout fund to make it more effective.

The announcement by the European Central Bank, Federal Reserve and other central banks to provide short-term funding suggests a concerted effort by authorities to stem Europe's debt crisis after weeks of market turmoil.

"This is good for the European banking system, so we're seeing a push higher in equity prices," said Rick Klingman, a Treasury trader at BNP Paribas in New York.

"The ECB-Fed joint announcement is causing a risk-on type trade because they're providing dollar funding through year-end."

European shares rose more than 2 percent and the euro jumped over 1 percent after the ECB unveiled three-month dollar loans in a move to prevent money markets from freezing up.

The announcement sharply boosted bank shares in the euro zone by 6 percent and cut aversion to risk. The price of safe-haven government debt and gold fell.

The euro rose as high as $1.3937, according to electronic trading platform EBS, before easing a bit, up 0.9 percent.

The FTSEurofirst 300 index of top European shares rose 2.2 percent, and has now gained 6.2 percent since touching a two-year low on Tuesday.

The ECB move, which came a day after the notion of common euro zone bonds was again floated and European leaders pledged support for Greece while insisting on austerity measures, was still unlikely to relieve market stresses over the long term.

"The swap agreements alleviate funding concerns in the short term, but it doesn't tackle the underlying problems, nor is it a solution to the European crisis," said Lauren Rosborough, currency strategist at WestPac in London.

On Wall Street, the Dow Jones industrial average was up 131.96 points, or 1.17 percent, at 11,378.69. The Standard & Poor's 500 Index was up 13.34 points, or 1.12 percent, at 1,202.02. The Nasdaq Composite Index was up 22.44 points, or 0.87 percent, at 2,594.99.

The Nasdaq briefly turned negative before midday after Netflix Inc cut its forecast, sending its shares down 15 percent.

In a sign of difficulties ahead, German Chancellor Angela Merkel bluntly rejected euro zone bonds as a solution to Europe's sovereign debt crisis.

There was also no clear sign from a conference call of German, French and Greek leaders on Wednesday that a stalemate over Athens' next bailout payment had been broken.

Investors also pushed aside a fresh spate of disappointing data that showed new claims for US jobless aid unexpectedly rose last week and factory activity along the mid-Atlantic contracted early this month. The data backed the view the Fed would move soon to boost economic growth.

The price of the 30-year US Treasury bond fell more than a full point as the prospect of a long stretch of loose monetary policy coupled with higher inflation prompted investors to dump long bonds.

The 30-year bond was last off 27/32 in price to yield 3.32 percent. The benchmark 10-year US Treasury note fell 22/32 in price to yield 2.07 percent.

Bund futures fell as euro zone leaders showed signs of their determination to see out Greece's debt problems without it leaving the single currency, prompting some to take profit on a recent rally in safe-haven bonds.

Crude oil rose more than $3 a barrel at one point, buoyed by the rally in European equities, a weaker dollar and improved risk appetite.

Brent crude for October delivery, which expires on Thursday, was up $2.56 at $114.96 a barrel.

Spot gold prices fell $37.70 to $1,781.50 an ounce.

Copyright Reuters, 2011