* Solid earnings help push U.S. stocks higher
* MSCI world equity index rises from 3-month lows
* EC verdict due on Greece keeps euro under wraps
* Australia surprises by holding interest rates unchanged
(Updates with closing U.S. market prices)
By Daniel Bases
NEW YORK, Feb 2 (Reuters) - U.S. stocks rallied on upbeat
earnings and economic data on Tuesday, while European shares
advanced, helped by miners benefiting from Australia's interest
rate policy.
Investors sold some of their U.S. dollars, venturing out of
the perceived safe-haven, thereby giving commodities a boost as
their costs fall with the weakness in the greenback.
European government credit markets were in limbo until the
European Commission gives its verdict on Greece's budget plans,
due on Wednesday.
Greece's finance minister didn't help when he said Athens'
problems were a euro zone issue and other countries could
follow Greece, causing 10-year bond yield spreads over bunds in
Greece as well as Portugal, Ireland, Spain and Italy to widen.
For details, see [].
In New York the benchmark S&P 500 stock index recorded its
best two-day run-up since October. The Standard & Poor's 500
stock index rose 1.3 percent, to 1,103.32 <.SPX> and the Dow
Jones Industrial average gained 1.09 percent, to 10,296.85
<>.
The MSCI world equity index <.MIWD00000PUS> was up 1.29
percent at 292.26, ricocheting off a three-month low.
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.
"The earnings season in terms of companies beating
estimates has been very positive, among the strongest quarters
we've had since the early 1990s," said Michael Sheldon, chief
market strategist at RDM Financial in Westport, Connecticut.
But fourth quarter earnings comparisons are easy given the
financial crisis was at its height a year ago and companies
launched massive cost cutting measures.
The financial sector is expected to lead the advance,
rising 73 percent versus a year earlier. Strip out financial
sector results and earnings are only expected to rise 15
percent, according to Thomson Reuters data.
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 which benefited from the Reserve
Bank of Australia's surprise decision to hold its key cash rate
steady. []
The pan-European FTSEurofirst 300 <> index of top
shares closed up 0.9 percent at 1,027.18 points.
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.
Crude oil prices <CLc1> rose 3.51 percent to $77.04 a
barrel on hopes energy demand in China and the United States
will grow. Gold <XAU=> hit a two-week high of $1,117.95 before
slipping back to $1,114.95, up $9.05 on the day.
DOLLAR WEAKENS
The dollar fell against a basket of major trading-partner
currencies, with the U.S. dollar index <.DXY> down 0.29 percent
at 79.011.
The euro fell back from its highs, trading nearly flat
against the greenback at $1.3962 <EUR=> while the dollar tipped
just slightly lower against the yen at 90.36 <JPY=>.
Greece's fiscal woes contributed to a cap on the euro.
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 Aussie dollar <AUD=> fell to a low of US$0.8780 before
paring losses to trade at US$0.8865, down 0.6 percent.
"The fact that the RBA did not raise rates is a reflection
of a growing view that the global economy is not out of the
woods yet," said John McCarthy, director of foreign exchange
trading at ING Capital Markets in New York.
White House adviser Paul Volcker defended the
administration's proposal to limit risk-taking by big banks
before the Senate Banking Committee.
U.S. benchmark 10-year Treasuries <US10YT=RR> rose
modestly, up 5/32 in price, pushing the yield down 3.63
percent.
(Additional reporting by Atul Prakash, Neal Armstrong, Naomi
Tajitsu and Tricia Wright in London; Gertrude Chavez-Dreyfuss,
Nick Olivari, Caroline Valetkevitch and Angela Moon in New
York; Editing by Kenneth Barry)
