* Solid earnings help push U.S. stocks higher
* MSCI world equity index rises from 3-month lows
* Australia surprises by holding interest rates unchanged
(Updates with data, comment, dateline, byline)
By Daniel Bases
NEW YORK, Feb 2 (Reuters) - Upbeat U.S. earnings and
economic data plus Australia's decision to hold interest rates
rippled through global markets on Tuesday, lifting stocks from
3 month lows and boosting commodity prices.
Gains were capped by ongoing worries over potentially
tougher U.S. banking regulations while investors waited for the
European Commission's recommendations on Greece's fiscal reform
plans on Wednesday before making big trading moves.
At 12:51 p.m. EST (1751 GMT), the MSCI world equity index
<.MIWD00000PUS> was up 1.17 percent at 288.53. In the U.S.
market, the Dow Jones Industrial average gained 0.82 percent,
to 10,268.96 <>, while the Standard & Poor's 500 stock
index rose 0.94 percent, to 1,099.38 <.SPX>.
Encouraging earnings reports from U.S. economic bellwether
United Parcel Service <UPS.N> and industrial conglomerate
Emerson Electric Co <EMR.N> helped fuel the U.S. rally.
"This whole earnings season is all about, 'Is there
top-line growth,' and some companies are showing it," said
Frank Ingarra, portfolio manager at Hennessy Funds in Stamford,
Connecticut. "This will help us going forward because if
companies grow their top line, they will hire some more
employees to drive sales and orders."
Forward earnings per share ratios have dropped since the
start of the year, from 15.6 percent to 13.8 percent, according
to Thomson Reuters data. The compression could indicate either
stock prices are not keeping up with earnings or investors
priced in the improved corporate results.
Pending sales of U.S. homes edged up as expected in
December, helping calm fears of renewed weakness in the
troubled housing sector. []
In Europe, share prices rose for a third straight day,
boosted by mining companies who benefit from the Reserve Bank
of Australia's surprise decision to hold its key cash rate
steady at 3.75 percent, against expectations for a rise to 4.0
percent. []
The pan-European FTSEurofirst 300 <> index of top
shares closed up 0.9 percent at 1,027.18 points.
Crude oil prices <CLc1> rose 2.61 percent to $76.37 a
barrel on hopes energy demand in China and the United States
will grow. Spot gold <XAU=> gained $8.10 an ounce to $1,115.
DOLLAR WEAKENS
The euro advanced against the U.S. dollar, supported by an
earlier narrowing in Greek government bond yield spreads over
German debt as investors a waited the European Commission's
reaction to Greece's plan.
Greek Prime Minister George Papandreou said the level of
Greek and euro zone bond spreads was completely unjustified,
keeping up the rhetoric against speculators he blames for
targeting his country. [] []
"Bond market fears over Greece reached a high last Thursday
and have since fallen back," said Camilla Sutton, senior
currency strategist at Scotia Capital in Toronto.
"This hints that the market is stabilizing and that much of
the bad news is now priced in," Sutton said.
The premium investors demand to hold 10-year Greek
government bonds over German Bunds initially fell to a session
low of 326 basis points but ended the day up 23 bps to 359 bps,
still well below last week's euro era highs of 405 bps.
The euro <EUR=> recovered from early losses to trade 0.19
percent higher on the day at $1.3954, recovering from a
seven-month low hit on Monday.
The Australian dollar <AUD=> fell to a low of US$0.8780
before paring losses to trade at US$0.8849 after the RBA
decision.
Against the Japanese yen, the dollar <JPY=> was down 0.28
percent at 90.37. Japan's benchmark Nikkei-225 stock index rose
1.6 percent, led by Toyota Motor Corp's <7203.T> 4.49 percent
rise after announcing plans to fix millions of recalled
vehicles.
Caution is likely to prevail with White House adviser Paul
Volcker due to appear before the Senate Banking Committee later
in the day to defend the administration's proposal to limit
risk-trading by banks, which triggered a sell-off in equities
when it was first unveiled last month. []
According to testimony obtained by Reuters, Volcker will
urge Congress to curb the risks taken by large banks to help
prevent them from being treated as "too big to fail."
U.S. Treasuries were little changed ahead of Volcker's
testimony. Benchmark 10-year Treasury note <US10YT=RR> prices
were up 1/32. The yield, which moves inversely to price, was at
3.65 percent, down from 3.66 percent on Monday.
(Additional reporting by Atul Prakash, Neal Armstrong,
Naomi Tajitsu and Tricia Wright in London; Nick Olivari,
Rodrigo Campos in New York, Editing by Andrew Hay)
