Global shares at 3-month high, oil rises on policy hopes

Tue Aug 7, 2012 4:56pm EDT
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By Leah Schnurr

NEW YORK (Reuters) - World stocks rose to a three-month high and oil prices jumped on Tuesday as investors bet that policymakers would do more to resolve the euro zone debt crisis and underpin the U.S. economy.

Global markets have enjoyed a strong run this week after the European Central Bank indicated it may start buying government bonds again to ease the pressure on Spain and Italy, albeit under strict conditions that have yet to be fully worked out.

Investors are also watching for signs that the Federal Reserve will take fresh measures to bolster the U.S. economy when it meets next month. Eric Rosengren, president of the Boston Federal Reserve Bank, said on Tuesday the central bank should launch another bond-buying program of whatever size and duration is necessary to get the economy back on its feet.

Rosengren is not a voter this year on the Fed's policy-setting Federal Open Market Committee.

Many analysts expect the Fed could launch a third round of bond-buying, known as quantitative easing, when it meets in mid-September. Richard Fisher, president of the Dallas Fed and a monetary policy hawk, on Monday told Reuters that taking new steps so close to November's presidential election would be a mistake.

Oil prices accelerated to a 12-week high on expectations of further economic stimulus, as well as supply worries linked to falling North Sea output expected in September, Middle East tensions and the Gulf of Mexico hurricane season. Brent crude futures pushed above $111 a barrel.

U.S. stocks ended higher, with the S&P 500 closing above the psychologically important 1,400 level for the first time since early May.

"Lots of people are starting to discount the fundamental issues in Europe and are now embracing risk. Spanish yields have come in, so the fire is not out, but they seem to be containing it better," said David Lutz, head of ETF trading at Stifel Nicolaus Capital Markets in Baltimore.   Continued...

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange August 6, 2012. REUTERS/Remote/Tobias Schwarz