* Drop in weekly U.S. jobless claims supports global rally
* Euro climbs to 2-month peak on higher risk appetite
* Benchmark 10-year U.S. Treasury yields above 3 percent
By Daniel Bases
NEW YORK, July 8 (Reuters) - Wall Street's rally on upbeat
jobs data fizzled on Thursday but European shares closed at a
10-day high and the euro hit a two-week peak after the first
details surrounding Europe's bank stress tests emerged.
Clarity on European bank stress tests heartened investors
who saw criteria for the checks were no worse than markets
expected. []
An improvement in Australia's employment market
kick-started the move to higher-risk assets and away from the
safe-haven greenback. []. For similar reasons,
gold eased below $1,200 an ounce and benchmark 10-year U.S.
Treasuries fell.
Risk appetite was also bolstered after weekly first-time
U.S. jobless claims dropped to their lowest level in two
months, offering a ray of hope for economic
recovery.[]
"The euro continued to be supported by the overall elevated
level of risk appetite," said Omer Esiner, a chief market
analyst at Commonwealth Foreign Exchange in Washington, D.C.
"That got a little bit of a boost from this morning's
positive initial jobless claims data."
The euro rose as high as $1.2700, its highest since
mid-May, according to Reuters data.
In midday New York trade, the Dow Jones industrial average
<> rose 44.20 points, or 0.44 percent, to 10,062.48. The
Standard & Poor's 500 Index <.SPX> gained 2.38 points, or 0.22
percent, to 1,062.65. The Nasdaq Composite Index <>
climbed 0.88 points, or 0.04 percent, to 2,160.35.
Declines in chipmaker shares cut into optimism over drop in
claims for jobless benefits and strong June sales for some top
retailers.
The drop in semiconductor helped cap the market's earlier
gains. Micron Technology <MU.O> fell 3.5 percent to $8.58 and
the PHLX semiconductor index <.SOXX> fell 1.6 percent after a
more than 5 percent gain Wednesday.
"Chipmakers are very sensitive to U.S. consumer demand, so
you may be seeing some reaction to sales not being great," said
John Canally investment strategist at LPL Financial in Boston.
Wall Street on Wednesday posted its best one-day advance in
about six weeks, after a strong earnings outlook from State
Street Corp <STT.N> bolstered hopes for the upcoming earnings
season.
According to Thomson Reuters data, quarterly earnings of
S&P 500 companies are expected to rise 27.1 percent in the
second quarter after surging 58.3 percent in the first period.
Both the Nasdaq and S&P briefly hit negative territory
before rising again.
U.S. retailers gave a mixed picture as monthly chain store
sales rose, boosted by promotions. The S&P retail index <.RLX>
fell 0.84 percent.
European shares closed higher, led by bank stocks. The
FTSEurofirst 300 <> index of top European shares closed
up 0.95 percent at 1,015.56 points, the highest close since
late June. Thursday marked the third straight day of of gains
after falling more than 7 percent in the previous two calendar
weeks.
Financial stocks were among the top gainers, with STOXX
Europe 600 banking index <.SX7P> rising 1.5 percent.
The MSCI world equity index <.MIWD00000PUS> rose 0.7
percent to a 1-1/2 week high. The Thomson Reuters global stock
index <.TRXFLDGLPU> also rose 0.7 percent.
In Japan, the Nikkei <> ended up 2.8 percent, buoyed
by short-covering from investors who believe the benchmark's
slide to a seven-month low this week was overdone.
EURO GAINS
Europe named 91 banks taking part in a test into the health
of its banking system on Wednesday -- including many regional
banks where markets suspect most of the sore spots reside -- as
it seeks to restore confidence in the sector.
European Central Bank President Jean-Claude Trichet said
appropriate action would be taken where needed on bank balance
sheets. He spoke after the ECB bank left interest rates on hold
at a record low 1.0 percent.
Trichet said the global economy and foreign trade may
recover more strongly than projected, further supporting euro
zone exports. The area's economy, however, is expected to grow
"at a moderate and still uneven pace in an environment of high
uncertainty," he said.
The euro rose 0.19 percent to $1.2658 <EUR=>, extending a
strong run after hitting a four-year low of $1.1876 in early
June. The greenback gained 0.76 percent at 88.37 yen <JPY=>.
The Australian dollar gained about 1.6 percent on the day
against the U.S. dollar to $0.8782 <AUD=D4>.
The International Monetary Fund raised its U.S. growth
forecast slightly to 3.3 percent for 2010 and 2.9 percent for
2011, but said unemployment would remain above 9 percent for
both years and inflation would remain low.
The IMF also sees the greenback depreciating moderately
over the next five years.
Benchmark 10-year U.S. Treasuries fell 9/32 of a point in
price pushing the yield to 3.02 percent <US10YT=RR>.
"It's a low, low-yielding world," said Richard Gordon,
fixed-income strategist at Wells Fargo Securities in Charlotte,
North Carolina. "Slow growth is being priced in and there's no
inflationary pressure right now."
The two-year German government bond yield <DE2YT=TWEB>
climbed to 0.733 percent, reaching highs not seen since the end
of April.
Spot gold fell 0.47 percent to $1,196.20 <XAU=> while crude
oil traded up 1.31 percent to $75.04 a barrel <CLc1>.
(Additional reporting by Edward Krudy, Richard Leong, Natsuko
Waki, Vivianne Rodrigues, Tricia Wright, Aiko Hayashi, Shinichi
Saoshiro; editing by Leslie Adler)
