RTRS:Global stocks, euro rally on debt crisis optimism
(Reuters) - Global equities and the euro rallied on Friday as investors bet that European leaders in crucial meetings over the next few days will move forward in resolving the euro zone's two-year-old debt crisis.
Doubts about the ability of European leaders to tackle the crisis eased a bit on Friday after German government sources said there were no serious differences between Germany and France ahead of a closely watched summit on Sunday in Brussels.
The addition of a second summit meeting on Wednesday supported investor optimism. U.S. stocks surged to their highest levels since early August.
France and Germany -- the two biggest economies in the euro zone -- are spearheading the effort to adopt a comprehensive strategy to fight a debt crisis that threatens to engulf the entire region.
The dollar slumped to a record low against the yen and a one-month low against the Swiss franc in a rally driven in part by investor wariness over of being caught on the wrong side of the summit meetings.
"The market is giving the benefit of the doubt that they are going to come up with some sort of a meaningful stopgap measure in Europe," said Boris Schlossberg, director of currency research at GFT in New York.
Investor sentiment over recent week has been continually buffeted by conflicting reports on progress in coming to grips with a debt crisis that started in Greece but has since grown to pose a possible threat to the global economy.
Mark Luschini, chief investment strategist at Philadelphia-based broker-dealer Janney Montgomery Scott, said of Friday's rise in risk appetite: "It's not surprising to see buyers begin to step in here out of concern that they would miss an opportunity" for another rally.
But thin trading volumes across equity, crude oil, government debt and precious metals markets suggested a lack of investor conviction and lingering apprehension that the outcome of the summits will be meaningful.
There was no expectation that a full agreement on such issues as how to scale up the euro zone's rescue fund, the European Financial Stability Facility, or how to reduce Greece's crippling debt would be reached.
European stocks ended a roller-coaster week higher, and U.S. equity markets were aided by strong earnings reports from some corporate icons.
McDonald's Corp (MCD.N) reported higher-than-expected quarterly profit. Honeywell International Inc (HON.N) reported its quarterly earnings increased 45 percent and lifted its full-year outlook.
McDonald's shares gained 3.7 percent, closing only slightly below a new high of $92.45 hit earlier in the day. Honeywell shares jumped 5.8 percent.
The Dow Jones industrial average .DJI closed up 267.01 points, or 2.31 percent, at 11,808.79. The Standard & Poor's 500 Index .SPX climbed 22.86 points, or 1.88 percent, at 1,238.25. The Nasdaq Composite Index .IXIC added 38.84 points, or 1.49 percent, at 2,637.46.
MSCI's all-country world equity index .MIWD00000PUS gained 2.2 percent, and the FTSEurofirst 300 .FTEU3 index of top European shares closed up 2.5 percent at 978.13 points.
Cyclical and financial stocks led the rally in Europe, with miner Xstrata (XTA.L) up 6.2 percent and French bank Societe Generale (SOGN.PA) up 5.6 percent.
The U.S. dollar fell broadly on euro zone debt hopes and talk the Federal Reserve may take new measures to boost growth.
"It is very much a dollar negative environment. Risk is on," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
The euro gained 0.9 percent to 1.3893 against the dollar.
The dollar last traded down 0.9 percent to 76.265 .DXY against a basket of major currencies.
In London, Brent crude slipped near its close, but U.S. crude settled higher.
ICE Brent for December delivery settled down 20 cents at $109.56 a barrel.
U.S. light crude oil futures rose $.133 to settle at $87.40 a barrel.
Government debt fell.
German Bund futures settled down 76 ticks, and the benchmark 10-year U.S. Treasury note was down 8/32 in price to yield 2.21 percent.
Gold rose 1 percent, breaking a four-day losing streak, as bullion moved in sync once again with riskier assets.
Spot gold was up more than 1 percent at $1,639.19 an ounce.
U.S. gold futures for December delivery settled up $23.20 at $1,636.10 an ounce.
(Reporting by Chuck Mikolajczak, Wanfeng Zhou, Chris Reese, Richard Leong, Gertrude Chavez-Dreyfuss and Frank Tang in New York; Writing by Herbert Lash; Editing by Leslie Adler)
