Equities, euro up as debt auctions loom

By @ibtimes on

European stocks and the euro both rose on Wednesday on hopes Portugal will get through a key bond auction unscathed and policymakers will boost a rescue fund that debt-scarred euro zone countries may need to tap.

Globally, equities were higher, led by emerging markets and generally boosted by hopes for a solid earnings season. The dollar was weaker against a basket of major currencies.

Investors were focused on Lisbon's first bond auction of the year later on Wednesday, when it is due to tap investors for around 1.5 billion euros. Spain, which is also under scrutiny over debt servicing, is seeking up to 3 billion euros on Thursday.

Markets are keen to see if the two countries will be able to fund themselves at a sustainable cost or will be forced to turn to the European Union and IMF for financial aid in the same way that Ireland and Greece did last year.

Suggestions are that the (Portuguese) offer will get away without pushing yields too far but even if success at this stage does serve to calm markets, there's the risk that this will be short-lived with Spain set to push out its own offer on Thursday, said Ben Potter, market strategist at IG Markets.

Equity markets seemed relatively calm about the prospects for the auction. The FTSEurofirst 300 <.FTEU3> was up half a percent for a 2.75 percent gain so far this year.

Portugal's main stock index <.PSI20> was up 0.8 percent and Spain's IBEX 35 index <.IBEX> jumped 1.4 percent.

MSCI's all country world index <.MIWD00000PUS> was up half a percent with its emerging market counterpart gaining more than 1 percent.

Earlier, Japan's Nikkei <.N225> ended flat after hitting an eight-month high during the session.

EURO EDGES UP

The euro gained, extending this week's rebound, with the focus on Portugal.

The risk is that demand will be lower than the market expects, which would result in a weaker euro, said Marcus Hettinger, global currency strategist at Credit Suisse in Zurich.

The common currency has been enjoying respite after euro zone sources said the region's finance ministers are likely next week to consider the option of raising the effective lending capacity of the currency bloc's rescue fund as part of efforts to calm jittery markets.

It was above $1.30.

In the euro zone bond market, the 10-year German bond yield was 2.958 percent and the two-year Schatz yield was 0.925 percent, both up about three basis points.

(Additional reporting by Naomi Tajitsu and Brian Gorman)

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