* World stocks rally on earnings optimism
* Euro recovers after Greece's debt auction results
* Downgrade of Portugal's ratings weighs on euro zone
(Updates with U.S. markets, changes byline, dateline, previous
LONDON)
By Walter Brandimarte and Dominic Lau
NEW YORK/LONDON, July 13 (Reuters) - Global stocks rallied
on Tuesday as Alcoa opened the U.S. earnings season with strong
results, while the euro recovered after Greece successfully
tapped capital markets for the first time since late April.
Alcoa, the first Dow component to report, posted
second-quarter earnings late on Monday that beat expectations,
raising hopes of similarly strong results for other companies.
Rail company CSX also posted a higher-than-expected profit. For
details, see [] and [].
Investors have been eagerly awaiting the second quarter
earnings season for confirmation that a recent stock rally was
justified. The S&P rose more than 5 percent last week, its best
weekly performance of the year, despite rising fears the past
two weeks of a double-dip economic recession.
"Alcoa and CSX are core industrial companies that had
nothing but good things to say, making it harder to find
evidence of this double-dip recession we were worried about,"
said James Meyer, chief investment officer at Tower Bridge
Advisors in West Conshohocken, Pennsylvania.
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> rose 1.3 percent, while the the FTSEurofirst
300 <> index of top European shares jumped 1.96 percent,
in its sixth consecutive session of gains.
The Dow Jones industrial average <> climbed 138.72
points, or 1.36 percent, to 10,354.99, in mid-morning New York
trading, while the Standard & Poor's 500 Index <.SPX> gained
13.65 points, or 1.27 percent, to 1,092.40. The Nasdaq
Composite Index <> was up 25.20 points, or 1.15 percent,
at 2,223.56.
Alcoa's shares rose 1.5 percent. The U.S. earnings season
continues in full force on Tuesday, with tech bellwether Intel
Corp's <INTC.O> report after the market closes.
GREECE PASSES TEST
The euro recouped early losses against the dollar, up 0.6
percent at $1.2665, after Athens successfully sold 1.625
billion euros ($2 billion) of six-month Treasury bills.
It was the first borrowing test for the debt-ridden country
since it secured a 110 billion euro EU/IMF emergency funding
deal in May. []
Greece managed to to get market funding at a slightly
cheaper cost than the 5.0 percent it pays to borrow under that
emergency funding deal, but the yield was still higher than a
previous similar sale. Demand was also lower.
"It's good for Greece and the euro, but (Greece) has a long
way to travel, as its economic challenges are pretty severe,"
said Paul Robinson, a currency strategist at Barclays Capital
in London.
"It's going to take years to figure this out, not just one
auction," he added.
Concerns about the financial situation of weaker euro-zone
members still lingered, however, after Moody's Investors
Service cut Portugal's credit ratings by two notches to A1,
following a similar move by the S&P in April. []
The U.S. dollar was also weaker against a basket of major
currencies, with the U.S. Dollar Index <.DXY> down 0.55 percent
after government data showed the U.S. trade deficit widened
unexpectedly in May. []
The greenback was also down 0.30 percent against the
Japanese currency <JPY=>, at 88.35 yen.
"The dollar is getting hurt across the board today on a
combination of things, including better earnings and a wider
U.S. trade gap," said Brian Dolan, chief strategist at
Forex.com in Bedminster, New Jersey.
The good performance on equity markets also boosted
commodity prices in general, with prices of U.S. crude oil
rising more than 2 percent.
The August crude contract <CLQ0> was 2.54 percent higher at
$76.85 per barrel.
U.S. Treasury prices slipped, on the other hand, before a
$21 billion auction of 10-year notes later in the day. The
benchmark 10-year U.S. Treasury note <US10YT=RR> was down 5/32
in price, with the yield at 3.0844 percent versus Monday's
close of 3.06 percent.
(Additional reporting by Ryan Vlastelica, Burton Frierson and
Steven C. Johnson in New York; Editing by Philip Barbara)
