Global shares, euro tick higher on hopes for Spain deal

NEW YORK (Reuters) - Stocks and the euro rebounded on Friday as expectations that Spain will seek a bailout that could resolve its debt problems improved the sentiment on Europe

Spain is considering speeding up a planned rise in the retirement age as it races to cut spending and meet conditions of an expected international sovereign aid package, sources with knowledge of the matter told Reuters. The sources also said Spain may freeze pensions, something that the country's deputy prime minister later denied.

Oil prices rose on supply worries over tensions in the Middle East and delays in North Sea shipments. Brent crude climbed 1.2 percent above $111 a barrel, though it remains down almost 5 percent on the week.

"There is that news out of Europe, where they seem to be making more progress towards helping Spain out, so that is going to continue to kind of support us, for sure,"

The euro rose against the dollar, helped by the outlook for Spain. Volume was thin ahead of the weekend, exacerbating volatility, and traders said the euro may struggle to extend gains amid uncertainty over the timing of a potential bailout.

German Finance Minister Wolfgang Schaeuble dented expectations by saying on Friday that Spain did not need a sovereign bailout on top of the package already agreed for its banks because it was on the right path to regain the confidence of markets.

A jump in the shares of Apple Inc (AAPL.O), the most valuable U.S. company, helped boost Wall Street. Apple shares hit a record high of $705.07 after it debuted the latest version of its iPhone worldwide, before the shares pared gains slightly to trade up 0.8 percent to $704.54.

The Dow Jones industrial average .DJI was up 28.48 points, or 0.21 percent, at 13,625.41. The Standard & Poor's 500 Index .SPX was up 3.96 points, or 0.27 percent, at 1,464.22. The Nasdaq Composite Index .IXIC was up 13.59 points, or 0.43 percent, at 3,189.55.

With Friday's gains, the S&P is flat for the week. Year-to-date, the benchmark index is up 16 percent, boosted by concerted central bank economic stimulus measures. Investors have been looking for reasons to keep pushing equities higher after steep gains since June.

European shares also rose, with the pan-European FTSEurofirst 300 .FTEU3 closing up 0.4 percent after having briefly tested 14-month highs earlier. Banks led gains, driven by Spanish banks BBVA (BBVA.MC) and Banco Santander (SAN.MC) on the expectations for progress in solving Spain's debt problem.

The MSCI global index .MIWD00000PUS climbed 0.5 percent. The expiration of options contracts could spur some volatility later in the U.S. session.

The euro, which has lost around 1.5 percent since hitting a 4-1/2-month high a week ago, was up 0.22 percent at $1.2996, having briefly climbed back above the psychologically important $1.30 mark.

The dollar fell 0.1 percent against a basket of currencies .DXY to 79.348, bringing it closer to the 6-1/2-month low of 78.601 hit last week in the wake of aggressive monetary easing by the U.S. Federal Reserve.

With all eyes on whether Spain will call for aid, support for the euro was seen at Thursday's low, which stood just above its 233-day moving average at $1.2915.

Markets brushed off a well-flagged report from the UK showing that plans to reduce its deficit have fallen behind target as the European debt crisis has hit global growth.

The news followed Italy's warning late on Wednesday that its recession will be far more severe than forecast, making it harder to reduce the country's debt burden.


Underlining fears about faltering global growth, the World Trade Organization cut its global trade forecast to 2.5 percent from 3.7 percent on Friday.

In bond markets, the benchmark 10-year U.S. Treasury note was up 3/32 in price, the yield at 1.7545 percent.

Yields on Spain and Italy's 10-year bonds were slightly higher, while demand for German government bonds also eased as investors adjusted positions ahead of the weekend amid the growing speculation that Spain is preparing for a bailout. December Bund futures settled at 140.00, down 21 ticks on the day.

The ECB's new plan that requires struggling countries to submit to fiscal rehabilitation programs in order to qualify for bond-buying support in the open market has been a key factor in the sharp drop in Italian and Spanish borrowing costs and the 15-20 percent surge in major stock markets.

Gold prices hovered at a 6-1/2-month high, rising 0.2 percent to $1,770.76 an ounce.

(Editing by Dan Grebler and Leslie Adler)

Updated Date: Sep 22, 2012 00:15 AM

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