NEW YORK: Global stocks surged on Tuesday, as forecast-beating results by some major US companies spurred sentiment and a Spanish bond auction drew stronger demand than expected, easing worries about the European debt crisis.
Prices of US Treasuries fell on the renewed appetite for stocks and as the demand for Spain's short-term debt tempered safe-haven demand.
The dollar and the yen, both low-yielding currencies, faltered as the renewed confidence drove investors to seek higher returns in other riskier currencies.
On Wall Street shares snapped a two-day decline and in Europe shares rallied 2 percent after quarterly results from investment bank Goldman Sachs Group Inc and beverage giant Coca-Cola Co topped expectations, lifting hopes for the rest of the earnings season.
"It's a combination fueled on some slight resolution in Spain and improving profit conditions," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "There was a fair amount of a distrust discount built into the market."
Yields on Spain's 10-year bonds dipped below 6 percent ahead of a longer-term Spanish government debt auction on Thursday. Spanish debt yields have jumped recently on concerns about the nation's fiscal stability in the latest flare-up of the euro zone debt crisis.
There was still unease, however, about whether the market strength would last, with a focus on Spain's auction on Thursday. Spain is seen as the potential new source of contagion in the euro zone debt crisis.
"We have a 10-year note auction on Thursday in Spain and that will be very important," said Wilmer Stith, a portfolio manager of Wilmington Trust Broad Market Bond Fund, part of Wilmington Trust Investment Advisors with about $15 billion in assets under management. "Spanish yields are below 6 percent which is somewhat encouraging going into Thursday's auction."
The Dow Jones industrial average was up 201.13 points, or 1.56 percent, at 13,122.54. The Standard & Poor's 500 Index was up 21.19 points, or 1.55 percent, at 1,390.76. The Nasdaq Composite Index was up 55.87 points, or 1.87 percent, at 3,044.27.
Coca-Cola rose 2.6 percent to $74.33 and was one of the top boosts to the Dow industrials after the soft drink maker reported higher quarterly profit.
Goldman Sachs gained 0.6 percent to $118.44 after it reported earnings fell from a year ago but topped many analysts' views.
US economic data was mixed as groundbreaking on US homes fell unexpectedly in March, but permits for future construction rose to their highest level in 3-1/2 years. The PHLX housing index gained 1.6 percent.
Of the 39 companies in the S&P 500 index that have reported through Tuesday morning, 74.4 percent topped analysts' expectations, according to Thomson Reuters data. This week, 86 S&P 500 companies are scheduled to report.
In Europe the FTSE Eurofirst index of top European shares closed up 2 percent at 1,053.12 points, back at levels seen before the Easter break.
However, a number of strategists reckoned the gains might prove short-lived, with Spain's longer-term debt auction later in the week seen as a bigger indicator of investor sentiment.
"Certainly a majority of European equity markets are going to struggle to make headway until the situation with regard to the European debt crisis calms down and the growth outlook becomes clearer," Richard Jeffrey, chief investment officer at Cazenove Capital Management, said.
"I think if required the ECB will intervene further but I think this will be a risk-off quarter whereas the first quarter - the majority of it was risk on."
The MSCI world equity index was up 1.37 percent.
The benchmark 10-year US Treasury note was down 6/32, with the yield at 2.0034 percent in reaction to the Spanish bond auction.
The Spanish bond auction and upbeat German investor sentiment gave investors the go-signal to temporarily leave dollar and yen safety and briefly gave the euro support versus the greenback.
The Canadian dollar led all riskier currencies, jumping more than 1 percent after the Bank of Canada said it may need to start hiking rates due to firmer-than-expected growth and inflation. Sterling, the Australian and New Zealand dollars also posted gains against the greenback, reflecting investors' increased appetite for risk.
In midday New York trading, the dollar index slipped to 79.529. The euro was also 0.1 percent lower at $1.3122 after earlier surpassing Monday's high to hit $1.3173.
Brent crude dipped below $119 a barrel while US crude for May delivery, which expires on Friday, rose $1.70 to $104.66 a barrel. Brent was under pressure from limited demand in the physical market due to seasonal refinery maintenance.
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