* Wall St rises more than 1 pct; Treasuries sell off
* Dollar rises on back of higher Treasuries yields
* U.S. yield curve steepest on record
By Walter Brandimarte
NEW YORK, Dec 21 (Reuters) - Optimism about the economic
recovery on Monday encouraged investors to buy stocks and dump
U.S. Treasuries, while gold prices fell as investors expected
the dollar to remain firm in the beginning of the new year.
Expectations that the U.S. economy is reviving drove the
dollar to more than a six-week high against the yen and kept it
near its strongest level against the euro in three months.
The price of oil rose on concerns about the security of
energy facilities in Iraq and Nigeria and as cold weather on
both sides of the Atlantic increased fuel demand.
Shares of energy companies rose with the higher oil
prices.
Merger and acquisition activity drove up stocks in both the
United States and Europe, and the signs of a recovering economy
bolstered markets.
The pan-European FTSEurofirst 300 index closed up 1.5
percent, and the three major U.S. indexes gained more than 1
percent.
"Some of the laggard fund managers need to put more equity
in their portfolios," said Heino Ruland, strategist at Ruland
Research, in Frankfurt. "Some of us missed the boat.
"There's no news out that would justify this sort of rise
(today), and it's on low volume. I think the rally will go
further. The economic recovery in the third quarter was strong,
and it will also be in the fourth quarter."
The pan-European FTSEurofirst 300 index <> jumped 1.4
percent to 1,027.87 points, after two consecutive sessions of
losses, buoyed by energy shares.
The Dow Jones industrial average <> rose 119.49 points,
or 1.16 percent, to 10,448.38, while the Standard & Poor's 500
Index <.SPX> gained 14.74 points, or 1.34 percent, to 1,117.21.
The Nasdaq Composite Index <> was up 29.62 points, or 1.34
percent, at 2,241.31.
Health-care shares stood out, with the Morgan Stanley
Health Payor index <.HMO> up more than 3 percent, after the
U.S. Senate advanced health-care legislation that had been
stripped of provisions deemed detrimental to insurers and other
health-related companies. For details, see [].
Aluminum producer Alcoa rose 8.1 percent after announcing a
joint venture to build an aluminum complex in Saudi Arabia, and
on a Morgan Stanley upgrade.
Stocks gained globally, with the MSCI all-country world
stock index <.MIWD00000PUS> up 1.0 percent.
Investors have been cautiously optimistic about retail
sales during this holiday season, after higher-than-expected
jobs and producer inflation data last week were seen as a sign
that the economy is recovering.
"We have an economy that is recovering, and we have a
Federal Reserve that says they are going to keep rates lower
for longer," said James Caron, co-head of global rates research
at Morgan Stanley in New York.
US YIELD CURVE STEEPENS
U.S. Treasury debt prices fell, with the 30-year bond down
more than a full point as investors looked to riskier assets.
Bets that the U.S. Federal Reserve will have to raise interest
rates in the future caused spreads between yields on two-year
and 10-year U.S. Treasury notes to widen sharply on Monday,
taking the yield curve to its steepest on record.
The yield spread between those two maturities widened to
280 basis points from 274 basis points last week, according to
Reuters data.
Also weighing on Treasuries prices were worries about an
expected massive wave of government debt issuance next year.
Trade volume was thin at the beginning of a holiday-shortened
week, exacerbating price moves, analysts said.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 23/32, with the yield at 3.6322 percent, up from 3.54
percent late on Friday. The 2-year U.S. Treasury note
<US2YT=RR> was down 3/32, with the yield at 0.8395 percent from
0.80 percent.
Higher Treasury yields, coupled with expectations that the
U.S. economy might be recovering faster than expected, led the
U.S. dollar to strengthen 0.71 percent against the Japanese yen
<JPY=>, to 90.94. The dollar earlier climbed as high as 91.01
yen <JPY=>,according to Reuters data, the highest level since
early November.
The euro <EUR=> was down 0.15 percent at $1.4319 per
greenback. But the U.S. Dollar Index <.DXY>, which compares the
dollar against a basket of major currencies, was only 0.04
percent higher.
Expectations that the U.S. dollar will hold its gains
through the beginning of the new year caused spot gold prices
<XAU=> to fall $11.35, or 1.02 percent, to $1100.70.
U.S. crude oil <CLc1> rose 0.38 percent to $73.64 per
barrel, partially due to concerns about the security of oil
installations in Nigeria, where militants attacked an oil
pipeline for the first time since an amnesty offer.
[]
Cold weather in the United States and the expiration of
January crude contracts also pressured prices, traders said.
The Reuters/Jefferies CRB Index <.CRB> of commodity futures
was up 0.07 points, or 0.03 percent, at 276.21.
(Additional reporting by Chris Reese, Ryan Vlastelica,
Wanfeng Zhou; Editing by Leslie Adler)
