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The Globe and Mail

At midday: Shares, euro rise on ECB hopes

A structure showing the Euro currency sign is seen in front of the European Central Bank headquarters in Frankfurt on July 11, 2012.


Global stocks and the euro rose on Monday after Greece made progress on its debt bailout program, adding to gains driven by ECB plans to help euro zone nations under pressure from bond markets.

The gains followed a strong finish to last week after robust U.S. jobs data on Friday eased concerns about global growth.

Investor optimism was boosted by comments from European Central Bank President Mario Draghi late last week on plans for a new wave of bond purchases aimed at helping to calm the euro zone's turmoil, lately focused on Spain and Italy's high borrowing costs.

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"Investors are less pessimistic about the euro zone situation. There is the expectation that something positive will come out of the ECB plan and so investors are more willing to search for risky assets that look attractive," said Aroop Chatterjee, senior currency strategist at Barclays Capital in New York.

Inspectors from the International Monetary Fund, the European Commission and the European Central Bank – known as the troika – concluded a visit to Greece, saying they would return in September to give their final verdict.

They said Greece has made progress in finding budget cuts needed to continue its bailout program, but cautioned that not all work is done.

"The markets are embarking on hopes to see some progress on the European situation and that the ECB has stated a ... road map to support Spain and Italy. We are in an environment where it seems the U.S. economy is bottoming out," said Didier Duret, chief investment officer at ABN-AMRO Private Banking.

Wall Street rose to a three-month high in midday trading, while European shares closed at their highest level in more than four months.

The MSCI World Index, which captures the world's biggest stock markets, was up 0.9 per cent to its highest level since early May. The pan-European FTSEurofirst 300 provisionally ended up 0.4 per cent at 1,085.79.

The Dow Jones industrial average gained 70.84 points, or 0.54 per cent, at 13,167.01. The Standard & Poor's 500 Index was up 6.90 points, or 0.50 per cent, at 1,397.89. The Nasdaq Composite Index was up 25.58 points, or 0.86 per cent, at 2,993.48.

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The benchmark 10-year U.S. Treasury note was up 10/32, the yield at 1.5339 per cent.

The euro zone's problems remain the focus for many major investors. The ECB promised last week to stabilize the bloc's bond markets, but tensions remain as details of exactly how to achieve this have yet to be settled.

In midday trading, the euro rose 0.2 per cent against the dollar to $1.2414 , below a peak of $1.2443 hit in Asian trade, its strongest since July 5. Gains in the euro over the last two days were nearly 2 per cent, its best two-day showing since late October.

The ECB continued to keep a lid on its bond purchase program last week. The ECB has barely used the Securities Markets Program this year and has not bought any bonds in 21 weeks despite a severe intensification of the euro zone debt crisis.

Oil gained in thin, choppy trade, supported by higher equities but buffeted by ongoing turmoil in the Middle East.

In New York, crude recovered from early losses and was up 48 cents at $91.88 a barrel.

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