While you were sleeping: Banks run ahead

While you were sleeping: Banks run ahead

(BusinessDesk) January 13 - Equities in Europe and on Wall Street rallied after Portugal’s successful bond sale eased concerns about the euro-zone’s debt crisis, with banks advancing the most.

Portugal’s bond sale met strong demand, lifting some pressure off the indebted country to seek a financial bailout.

The country sold 599 million euros (US$782.2 million) of 10-year bonds at an average yield of 6.716% today, compared with a yield of 6.806% at the previous sale on November 10. The auction was the first debt sale by any of the euro region’s most indebted countries this year.

The Dow Jones Industrial Average and the S&P 500 Index climbed 0.89% and the Nasdaq Composite Index advanced 0.67%. The benchmark Stoxx Europe 600 Index gained 1.3% to 285.65.

"It's a bit of relief from the fear that was running really high some days ago. There was talk that Portugal could be asking for help very soon," Klaus Wiener, chief economist at Generali Investments in Cologne, told Reuters.

Even so, European governments were considering aid for Portugal, debt buybacks, lower interest rates on rescue loans and guarantees against excessive debt as part of a package to quell the financial crisis, Bloomberg News reported, citing four people with knowledge of the talks.

The plan may include a loan to Portugal of about 60 billion euros and purchases of outstanding Greek debt.

EU officials were trying to forge a “comprehensive” plan to contain the currency area’s sovereign-debt crisis, Economic and Monetary Commissioner Olli Rehn said today.

Investors will focus now on Spain and Italy who will sell debt on Thursday for any sign of contagion.

"A couple of positive bond auctions might limit euro losses, but I don't think they are going to alleviate any of the long-term concerns," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

The euro was last 0.4% higher at US$1.3025, after having risen as high as US$1.3047 on trading platform EBS.

JPMorgan Chase & Co advanced after CEO Jamie Dimon said the bank could pay an annual dividend of as much as US$1 once the Federal Reserve gives its approval, pending the completion of stress tests.

"The news from JPMorgan starts to bring some clarity into that issue and remind the market these companies are ultimately going to be good dividend payers," Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago, told Reuters.

U.S. Treasury Secretary Timothy Geithner said today that China's yuan currency remained "substantially undervalued" and that it was in Beijing's own interest to let it appreciate more rapidly to ward off inflation risks,

"China still closely manages the level of its exchange rate and restricts the ability of capital to move in and out of the country," Geithner told an audience at Johns Hopkins University, in a speech before next week’s state visit of Chinese president Hu Jintao.

Geithner also said the Obama administration was looking at tax changes to boost corporate investment.

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