* Euro jumps as Greece returns to capital markets
* World stocks rally for 6th session on earnings optimism
* Downgrade of Portugal's ratings weighs on euro zone
* Intel reports strong quarterly results after close
(Updates with U.S. markets close)
By Walter Brandimarte
NEW YORK, July 13 (Reuters) - The euro hit a two-month high
against the dollar on Tuesday as Greece successfully returned
to the capital markets, while stocks rallied for the sixth
straight session following a strong start for the U.S. earnings
season.
Athens passed its first borrowing test by selling Treasury
bills at a slightly lower yield than the 5 percent it pays
under an emergency funding deal secured in May with the
European Union and the International Monetary Fund.
The auction, worth 1.625 billion euros ($2 billion) in
six-month Greek T-bills, was still more costly for Athens than
a previous similar sale, underscoring future refinancing
challenges for the debt-ridden country. 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."
Also reminding investors of weaker euro-zone members'
financial woes was a two-notch downgrade of Portugal's credit
ratings by Moody's Investors Service. []
The news had little impact on the euro, however, as
investors said Moody's was just catching up with rival Standard
& Poor's, which rates Portugal still two notches lower than
Moody's new rating.
The euro <EUR=> gained 0.98 percent to $1.2713 after
hitting a session peak of 1.2739, its highest level in two
months. The European single currency was also supported by
hopes that companies will report strong second-quarter earnings
on both sides of the Atlantic.
Optimism about this season's earnings rose after Alcoa
<AA.N>, the first Dow component to report, posted
second-quarter results late on Monday that beat expectations.
Rail company CSX also posted a higher-than-expected profit. For
details, see [] and [].
After markets closed, Intel Corp <INTC.O> reported
second-quarter earnings that beat investors' expectations,
supporting the positive market sentiment. Falling trading
volumes suggest, however, that the rally could be running out
of steam. []
Investors have been eagerly awaiting the earnings season to
start for confirmation that a recent stock rally was justified.
The S&P 500 rose more than 5 percent last week, its best weekly
performance of the year, despite rising fears in the past two
weeks of a double-dip economic recession.
"It's too early to call second-half demand because ...
Intel is the first one to report, but obviously earnings are
off to a very bullish start," said Patrick Wang, analyst with
Wedbush Securities in New York.
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> rose 1.46 percent, while the the FTSEurofirst
300 <> index of top European shares jumped 1.92 percent,
also its sixth consecutive session of gains.
The benchmark European stock index closed at a three-week
high, with financial stocks among the top gainers. The STOXX
Europe 600 banking index <.SX7P> rose 2.5 percent.
The Dow Jones industrial average <> ended up 146.75
points, or 1.44 percent, at 10,363.02 while the Standard &
Poor's 500 Index <.SPX> rose 16.59 points, or 1.54 percent, to
1,095.34. The Nasdaq Composite Index <> climbed 43.67
points, or 1.99 percent, to 2,242.03.
Alcoa's shares rose 1.2 percent in regular trading, while
Intel jumped more than 5 percent in after-hours action.
TRADE DEFICIT WEIGHS ON DOLLAR
The U.S. dollar was also weaker against a basket of major
currencies, with the U.S. Dollar Index <.DXY> down 0.80 percent
after government data showed the U.S. trade deficit widened
unexpectedly in May. []
The greenback was also down 0.16 percent against the
Japanese currency <JPY=>, at 88.48 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, with prices of U.S. crude oil jumping nearly
3 percent.
The August crude contract <CLQ0> settled $2.20 higher at
$77.15 a barrel, or 2.94 percent, its highest close since June
28.
U.S. Treasury prices slipped, on the other hand, as
investors preferred to buy stocks and after a "mildly weak"
auction of reopened 10-year notes, the second of this week's
three auctions worth a total of $69 billion.
Demand was also tepid for Monday's offering of three-year
notes. The benchmark 10-year U.S. Treasury note <US10YT=RR>
lost 14/32 in price, with the yield at 3.11 percent versus
Monday's close of 3.06 percent.
(Additional reporting by Alex Dobuzinskis, Ellen Freilich and
Vivianne Rodrigues in New York; Editing by Philip Barbara)
