Wall Street moved higher on optimism an agreement was on the horizon surrounding Greek debt and data pointed to renewed vigour in the US economy, while German debt yields climbed after comments from European Central Bank President Mario Draghi.
Greece threatened to miss a loan repayment to the IMF this week, opening the way for possible default, just hours before creditors were expected to present an ultimatum offering Athens funds in return for economic reform.
But French President Francois Hollande said Greece and its creditors are on the brink of a cash-for-reform deal. Markets have bounced back and forth on what seems to be a near-daily change in perception of Greece’s chances of reaching an agreement.
“The net enthusiasm in the market is reflective of hopes that the Greek crisis is going to be resolved here shortly,” said Matt Kaufler, portfolio manager at Federated Investors in Rochester, New York.
The dollar’s recent woes continued, spurred by better-than-expected inflation figures in the eurozone that also battered sovereign debt. It marks the second such sharp upward move in both the euro and sovereign yields in the last six weeks. The euro has gained more than three per cent against the greenback in the last two days, on track for its biggest two-day percentage gain since March 2009.
The euro extended gains against the dollar yesterday, up one per cent to $1.1266 after hitting a high of $1.1273.
German debt yields moved as high as 0.887 per cent, a day after their biggest jump in nearly three years, after the ECB raised its inflation forecast for 2015. Draghi said the central bank sees no reason to adjust its monetary policy stance in response to a recent rise in bond yields in Europe. With yields rising in Europe, US Treasury yields hit a three-week high. US 10-year notes fell 20/32 in price to yield 2.3337 per cent.
The selloff in Europe and US government debt and the sharp move in the euro mirrors the activity from mid-April to mid-May. Investors have bet heavily on dollar and bond rallies to continue, and have since shifted to avoid big losses.
US economic data showed private employers picked up hiring in May. The data comes ahead of the US Labor Department's more comprehensive non-farm payrolls report on Friday.
The Dow Jones industrial average rose 146.91 points, or 0.82 per cent, to 18,158.85, the S&P 500 gained 11.31 points, or 0.54 per cent, to 2,120.91 and the Nasdaq Composite added 36.83 points, or 0.73 per cent, to 5,113.35. MSCI’s all-country world index of stock performance in 46 countries was up 0.58 per cent.
Brent crude lost $1.29 at $64.20 while WTI crude was down 91 cents at $60.36. US crude stocks fell more than expected last week even as refinery run-rates eased.
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