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GLOBAL MARKETS-Shares climb, investors hope for Greece progress

Source : REUTERS
Last Updated: Thu, Nov 22, 2012 00:00 hrs

* Stocks earlier fell as lenders failed to agree on Greece

* Euro and U.S. dollar flat; Japanese yen rebounds

* Brent oil flat as Greece offsets on Gaza-Israel clashes

By Ryan Vlastelica

NEW YORK, Nov 21 (Reuters) - World shares advanced on Wednesday as policymakers in Europe reassured markets that a deal on releasing emergency aid to Greece was close, though the failure of lenders to come to an agreement on their own kept investors cautious.

Euro zone finance ministers, the International Monetary Fund and the European Central Bank will gather again Monday, after nearly 12 hours of talks overnight in Brussels failed to produce a consensus on how to shrivel Greece's debts.

After the meeting ended, French Finance Minister Pierre Moscovici said a deal was just "a whisker away," while European paymaster Germany said a plan was being developed to provide Greece with funding until 2016.

Shares in Europe rebounded from early losses. The FTSEurofirst 300 index of top shares closed 0.3 percent higher, while the Euro STOXX 50 recouped from an earlier drop to add 0.5 percent.

"European exchanges themselves are doing okay, so investors are saying 'we didn't really expect a resolution (on Greece),' just kind of learning to live with it," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

U.S. stocks gained in trading thinned by a national holiday Thursday for Thanksgiving. The Dow Jones industrial average was up 53.21 points, or 0.42 percent, at 12,841.72. The Standard & Poor's 500 Index was up 3.27 points, or 0.24 percent, at 1,391.08. The Nasdaq Composite Index was up 9.56 points, or 0.33 percent, at 2,926.24.

Investors in the U.S. digested the latest data, including weekly jobless claims that met expectations and a final read on November consumer sentiment that was below forecasts.

Market participants remained anxious about tax and spending changes - known as the fiscal cliff - poised to come into effect in the new year, though policymakers are not expected to get back to negotiations until after Thanksgiving.

The benchmark 10-year U.S. Treasury note was down 6/32, with the yield at 1.6882 percent.

The euro rose 0.1 percent to $1.28, also rebounding from earlier weakness of as much as 0.5 percent.

Prices for German debt, the safest in the euro zone, had eased slightly, sending 10-year yields down modestly to 1.431 percent.

However, a sale of 3.25 billion euros ($4.2 billion) of new German 10-year debt, which paid an interest rate of 1.5 percent, drew solid demand from investors worried about the outlook.

FED WARNING

Before the Greek impasse, world equity markets had come under pressure Tuesday after Federal Reserve Chairman Ben Bernanke warned that the central bank lacked the tools to cushion the impact of a potential U.S. fiscal crisis.

Bernanke said worries over fiscal negotiations, aimed at preventing a series of mandatory tax increases and spending cuts early next year, had already damaged growth in the world's largest economy.

His comments snapped a two-day rally on Wall Street Tuesday, but the MSCI world equity index later rose 0.3 percent.

Asian shares had initially fallen Wednesday in reaction to the Greek aid payment delay, but closed modestly higher, buoyed by gains in mainland Chinese markets and in Tokyo.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.2 percent, while Japan's Nikkei stock average closed up 0.9 percent at a two month-high.

YEN WEAKNESS

The Nikkei's gains came as shares of exporters rose, after the yen hit a seven-month low against the dollar, on expectations a new government will aggressively push the Bank of Japan to expand monetary stimulus.

Japan's opposition Liberal Democratic Party, tipped to win next month's general election, also promised to boost spending as it emerged that exports had fallen in annual terms for a fifth straight month in October.

The yen rose 0.9 percent to the dollar, rebounding from its weakest level since early April. The U.S. dollar was off 0.1 against a basket of currencies, while Brent crude erased earlier losses to trade flat at $109.91 per barrel.

Oil was flat, after earlier having been supported by mounting tensions in the Middle East amid days of fighting between Israel and Hamas, which many feared could disrupt oil flows. Concerns about Greece and the impact that could have on international growth, however, weighed on crude prices.

"There are opposing forces where the uncertainty in Europe and the United States meets with the bullish uncertainty in the Middle East ... so I think we're going to see a volatile market," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.



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