* U.S., European stocks rise as risk appetite returns
* Oil jumps nearly 4 pct,
* Safe-haven bonds fall on risk appetite
By Manuela Badawy
NEW YORK, May 26 (Reuters) - The euro fell against the
dollar for a third straight day on Wednesday on persistent
fears over the euro zone's debt problems, even as renewed risk
appetite boosted global stocks.
The euro slid more than against the dollar, stung by
concerns about tighter credit conditions, but stayed above the
8-1/2 year lows hit on Tuesday. Jittery investors also drove up
the price of gold as they sought safety in a hard asset amid
the concerns about Europe and volatile currency markets.
But other markets shrugged off fears to charge higher. Oil
prices rallied nearly 4 percent, climbing back above $71 a
barrel as gains in equity markets overshadowed rising crude
stocks. []
The euro, however, continued to stagger, also hit by
concerns about tighter dollar funding conditions as three-month
dollar interbank rates hitting a fresh 10-month high on
Wednesday and a surprisingly lackluster German debt auction.
For German debt auction see [].
"There is still a deeply negative sentiment toward the euro
due to the debt situation in Europe, the issue with Spain over
the weekend and how investors are bracing for the possibility
that other banks in the region may follow suit and may need a
bailout," said Joe Manimbo, senior market analyst at Travelex
Global Business Payments in Washington.
Spain took over a small savings bank, CajaSur, over the
weekend, and analysts said the move highlighted weakness in the
European banking sector.
Although the euro in recent weeks has become a proxy for
risk appetite, given Europe's debt crisis, and has tended to
rise or fall in tandem with global stocks, that link was
missing on Wednesday.
The euro <EUR=> dipped to $1.2222 against the dollar, down
1.21 percent on the day, according to Reuters data.
The index of world stocks rose 2.1 percent, and emerging
stocks rose 2.7 percent, partially recovering Tuesday's 4
percent decline -- their biggest one-day fall in over a year.
Since global equity markets peaked on April 15, $4.2
trillion in market value has been erased from the MSCI
all-country world stocks index. <.MIWD00000PUS>
On Wall Street, investors snapped up shares of beaten-down
companies and were also boosted by a surge in U.S. durable good
orders and new home sales for April.
The Dow Jones industrial average <> was up 76.93
points, or 0.77 percent, at 10,120.68. The Standard & Poor's
500 Index <.SPX> was up 10.42 points, or 0.97 percent, at
1,084.45. The Nasdaq Composite Index <> was up 27.31
points, or 1.24 percent, at 2,238.26.
Banks and industrial stocks, among the worst-hit issues in
the pullback, were among the day's top gainers, with Citigroup
Inc <C.N> climbing 3.7 percent to $3.92 and industrial
conglomerate General Electric Co <GE.N> up 3.2 percent.
Citigroup was upgraded to "outperform" by analysts at
Oppenheimer, which said the stock was a good value. For
details, see []
"Investors are taking a break from the relentless gloom
which has enveloped the markets since the month began," said
Chris Ahrens, strategist at UBS Securities in Stamford,
Connecticut.
EURO-TALK
U.S. Treasury Secretary Timothy Geithner urged Europeans on
Wednesday to work for a globally consistent approach to
financial reform as the European Union said it might go it
alone with a plan to tax banks to pay for future rescues.
[].
European shares rebounded, and the pan-European
FTSEurofirst 300 index <> closed up 2.4 percent at 972.17
points, a day after hitting nine-month lows. Miners were among
the top gainers, lifted by improving risk appetite as copper
prices rose.
Geithner's stress on coordination of new regulation
appeared aimed chiefly at Germany, Europe's biggest economy,
which stunned markets and angered its European Union partners
by unilaterally banning some speculative financial trades last
week. []
The dollar extended gains against the euro after U.S.
durables goods orders and new home sales rose more than
expected in April [].
A report showed sales of newly built U.S. single-family
homes rose in April to their highest level in nearly two years
as buyers rushed to benefit from a government tax credit. For
details, see []
Lennar Corp <LEN.N> rose 2.5 percent to $17.58, while the
Dow Jones homebuilder index <.DJUSHB> jumped 2.2 percent.
"I think the market really overreacted," said Nick Kalivas,
vice president of financial research and senior equity index
analyst, at MF Global. "You've basically seen a comeback from
the lows and that has essentially created some positive
momentum."
Manufacturing is leading the economy's recovery from the
worst recession since the 1930s, but consumers are now stepping
up to the plate as the labor market improves.
"We now have five quarters of increases, and that's a good
sign of transitioning from a recovery to sustainable growth,"
said John Canally, investment strategist and economist at LPL
Financial in Boston.
"It's too early to gauge the impact of the European crisis
... (we) probably have to wait until May or even July to see an
impact."
U.S. Treasuries briefly extended price losses after the
home sales rise in April, eroding the safe-haven luster of
government debt.
The rise in risk appetite hurt Treasuries, and the
benchmark 10-year U.S. Treasury note <US10YT=RR> was down
21/32, with the yield at 3.234 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 3/32, with the yield at
0.8528 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 37/32, with the yield at 4.1212 percent.
Treasuries prices were also undermined by traders looking
for price concessions ahead of the auction of $40 billion of
five-year notes on Wednesday afternoon.
(Reporting by Gertrude Chavez-Dreyfuss, Chris Reese, Edward
Krudy; writing by Manuela Badawy; Editing by Leslie Adler)
