Global stocks jump on Greek debt plan, U.S. dollar falls
New York (Feb 3) Stock markets rallied around the world on Tuesday while the U.S. dollar fell after the new Greek government dropped calls for a write-down of its foreign debt, easing concerns about growing instability in the euro zone.
While gold, viewed as a safe-haven investment, fell on the day, copper prices saw their biggest one-day jump since July 2013. Oil prices also continued their recent rebound, up more than 1 percent for a third straight session.
The Greek government, led by the left-wing Syriza party that won elections just over a week ago, on Monday ditched calls for a reduction of foreign debt and proposed ending a standoff with its creditors by swapping the debt for new growth-linked bonds.
"The market is beginning to see signs of some stability coming into oil and the Greek situation seems to be tilting towards the side of what the market is looking for, which is a retreat from its call for a debt writedown," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.
The MSCI International ACWI Price Index .MIWD00000PUS rose nearly 1 percent, while the pan-European FTSEurofirst 300 index .FTEU3 rose 0.8 percent. The Greek banking index .FTATBNK soared 18 percent while Greek bond yields fell sharply.
The Dow Jones industrial average .DJI rose 177.02 points, or 1.02 percent, to 17,538.06, the S&P 500 .SPX gained 14.47 points, or 0.72 percent, to 2,035.32 and the Nasdaq Composite .IXIC added 12.24 points, or 0.26 percent, to 4,688.93.
The benchmark 10-year U.S. Treasury note US10YT=RR was down 22/32, the yield at 1.7471 percent.
The U.S. dollar index .DXY fell 0.9 percent against a basket of currencies, while the euro EUR= was up 1.1 percent. The yen JPY= rose 0.1 percent against the dollar. The Aussie dollar AUD= skidded 0.9 percent lower against the greenback after Australia unexpectedly cut interest rates.
U.S. crude oil futures CLc1 jumped 4.6 percent to $51.85 per barrel while Brent crude LCOc1 added 3.5 percent to $56.67. Oil was boosted by the decline in the dollar as well as encouraging manufacturing data in the U.S.
Over the past four sessions oil has risen nearly 15 percent but both Brent and U.S. crude are still down about 50 percent from highs reached in June. U.S. shares of BP Plc (BP.N) rose 3 percent to $41.06 after the company announced a 13 percent reduction in capital expenditure for 2015, adding to cuts in investment in the sector.
Gold XAU=, seen as a safe-haven investment, fell 1.3 percent on the day while silver XAG= rose 0.3 percent.
Earlier, Asian shares sagged on growth concerns. MSCI's broadest index of Asia-Pacific shares, excluding Japan .MIAPJ0000PUS, dipped 0.2 percent after weak U.S. data added to concerns about the state of the global economy. Japan's Nikkei .N225 closed down 1.3 percent.