Stocks, euro gain on hopes for Greece aid deal
Speculation that the heavily indebted euro-zone nation could receive 120 billion euros before it runs out of cash this summer offered a measure of comfort to investors who were rocked by exceptional market volatility this week.
"What sparked the market today was some relief from European leaders that they'll do what they can to avoid a credit crisis," said King Lip, investment officer at Baker Avenue Asset Management in San Francisco.
However, risk aversion remains at elevated levels, signaled by a drop in oil prices and a jump in gold and the Swiss franc, traditionally seen as a safe-haven currency.
Nagging doubts whether backing from French and German leaders will speed up aid for Greece revived appetite for low-risk government bonds, paring initial losses spurred by encouraging remarks on Greece from German Chancellor Angela Merkel and French President Nicolas Sarkozy.
Merkel said on Friday that Germany and France wanted a quick solution to the impasse over a new aid package for Greece similar to the "Vienna Initiative." Under that 2009 pact, lenders agreed to boost credit for central and eastern Europe, while the main commercial banks committed to keep exposure and roll over credit lines.
Sarkozy said "there was no time to lose," suggesting that a deal to rescue Greece could be reached quickly. See
In Greece, Prime Minister George Papandreou appointed a new finance minister in an effort to push through harsh economic reforms amid weeks of public protests.
The euro was up about 0.7 percent for the day at $1.4292, paring earlier losses in volatile trade.
On Wall Street, the Dow Jones industrial average was up 38.90 points, or 0.33 percent, at 12,000.42. The Standard & Poor's 500 Index was up 3.56 points, or 0.28 percent, at 1,271.20. But the Nasdaq Composite Index was down 6.06 points, or 0.23 percent, at 2,617.64.
If the S&P 500 and Dow hold on to gains, the indexes would record their first positive week in seven. The S&P 500 is almost 7 percent below a three-year high hit on May 2nd.
The FTSEurofirst 300 index of top European shares gained 0.2 percent to end at 1,086.73. Its losing streak extended to seven weeks, falling 4.8 percent over that span.
The MSCI world equity index rose 0.4 percent, rebounding from a three-month low. It is on track to end the week lower and has moved into negative territory for the year.
HIGH ANXIETY
The outlook for stocks remains precarious, given the signs of an economic slowdown worldwide and persistent worries over debt issues in Greece, Spain, Portugal and Ireland.
The expiration of the Federal Reserve's $600 billion bond program, known as QE2, in two weeks, has left some investors wondering how risk assets will fare without it.
The International Monetary Fund downgraded its forecast for US economic growth on Friday and called for Washington and European countries to solve their budget woes. The IMF also said some fast-growing emerging economies might be overheating. For more, see
The latest data on consumer mood and economic activity signaled the US recovery was wobbly.
The Swiss franc, which strengthens with risk aversion, gained against the dollar to about $0.8473.
The euro rebounded against the franc to 1.2114 franc after touching a record low on Thursday of 1.1946 on electronic trading platform EBS.
"While we still believe that a new Greek package will be forthcoming, we warn of ongoing headline risk from rating agencies, the IMF, euro-zone politicians and the ECB (European Central Bank)," said Mark McCormick, currency strategist at Brown Brothers Harriman in New York.
The 10-year US Treasury note was down 4/32 in price, yielding 2.94 percent.
September US Treasury and German Bund futures fell 8/32 and 38 basis points, respectively, after setting contract highs on Thursday.
Spot gold last traded at $1,537.00 an ounce and was poised to record its biggest one-day gain in three weeks.
US July crude futures lost 2.9 percent, or $2.75, to $92.18 a barrel, while August Brent crude in London was down $2.04 at $111.96.
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