Stocks up, U.S. debt down on German court ruling

Wed Sep 12, 2012 10:28am EDT
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By Ellen Freilich

NEW YORK (Reuters) - U.S. stocks opened higher and global shares reached a five-month high after Germany's top court gave its go-ahead to the euro zone's new rescue fund and the market anticipated more liquidity from the U.S. Federal Reserve.

The German Constitutional Court allowed Germany to ratify the new rescue fund and budget, but gave parliament veto powers over future increases in the size of the fund.

Oil also rose as the German court ruling cleared a potential obstacle on the road to aiding the euro zone and global economy. Oil was also boosted on political risk, underscored by the killing of the U.S. ambassador to Libya and three other staff members.

"We have the expectation for some liquidity - by the Fed, by the ECB, and Mario Draghi has been aggressive in his statements," said Leo Kelly, managing director at HighTower Advisors in Sparks, Maryland, referring to the European Central Bank president.

The Dow Jones industrial average .DJI was up 32.45 points, or 0.24 percent, at 13,355.81. The Standard & Poor's 500 Index .SPX was up 4.38 points, or 0.31 percent, at 1,437.94. The Nasdaq Composite Index .IXIC was up 4.89 points, or 0.16 percent, at 3,109.42.

The Federal Reserve begins a two-day policy meeting on Wednesday and markets expect it to announce more easing measures when the meeting concludes on Thursday.

European stocks touched a 14-month high and yields on Spanish and Italian debt fell after the German court decision.

The decline in Spanish bond yields to well below 6 percent prompted Spain's Prime Minister Mariano Rajoy to say improved market conditions may make aid unnecessary.   Continued...

Traders react at their desks as the President of the German Constitutional Court (Bundesverfassungsgericht )Andreas Vosskuhle pronounces a judgement on the European Stability Mechanism (ESM) and fiscal pact, in front of the DAX board at the Frankfurt stock exchange September 12, 2012. Germany's Constitutional Court said on Wednesday the country can ratify the euro zone's new rescue fund and budget pact as long it can guarantee there will be no increase in German financial exposure to the bailout fund without parliament's approval. Ruling that an injunction against the ESM and fiscal compact was largely unfounded, the court said one condition for allowing ratification was that any increase in German liability beyond 190 billion euros must first be approved by the Bundestag lower house of parliament. REUTERS/Alex Domanski