By Wanfeng Zhou
NEW YORK, Dec 10 (Reuters) - The euro fell against the yen
while Italian stocks and bond prices sank on Monday after
Italian Prime Minister Mario Monti said he would resign, raising
concern about who will lead the euro zone's third biggest
economy out of its debt crisis.
U.S. equity investors focused on domestic news, driving
shares higher after stronger-than-expected sales from McDonald's
Corp while awaiting any sign of progress in budget talks in
Washington to avert looming tax hikes and spending cuts.
Monti announced over the weekend he would resign once the
2013 budget is approved, potentially bringing forward an
election due early next year. Monti has become an investor
favorite over the last year as he spearheaded a reform agenda in
a bid to rescue Italy from the threat of a Greek-style collapse.
The news pushed Italy's benchmark 10-year bond yield up to
4.83 percent, the highest in roughly more than
three weeks. Italian shares fell more than 2 percent,
with banks hit hard because of their hefty domestic government
'The political situation in Italy just adds to the
uncertainty in Europe, and this will have a negative impact on
the euro in the coming months,' said Matthew Lifson, senior
trader and analyst at Cambridge Mercantile Group in Princeton,
The euro fell 0.2 percent against the yen to
106.36 yen. It dropped as low as 105.94, its weakest in about
two weeks. But the common currency was able to erase losses
against the dollar to trade little changed at $1.2924.
Some analysts said the bond and currency markets' reaction
to the news out of Italy may have been overdone, given that
Monti would have called for elections in a few months time
anyway. Monti's decision simply expedites the process.
On Wall Street, the Dow Jones industrial average
gained 29.08 points, or 0.22 percent, to 13,184.21. The Standard
& Poor's 500 Index rose 2.47 points, or 0.17 percent, to
1,420.54. The Nasdaq Composite Index added 17.05 points,
or 0.57 percent, to 2,995.09.
Shares of McDonald's rose 0.8 percent to $89.23
after the fast food chain reported stronger-than-expected sales
in November, marking a rebound after a rare decline in October.
U.S. President Barack Obama met with Republican House of
Representatives Speaker John Boehner on Sunday to negotiate a
deal to avoid massive tax hikes and spending cuts that are set
to go into effect in the new year. Markets have been on edge in
the last month on forecasts that the scheduled measures could
send the economy into recession.
The two sides declined to provide details about the
unannounced meeting. Obama was expected to make remarks at 2
p.m. (1900 GMT) from Michigan where he is touring an auto
'We haven't had any 'progress' the last two weeks or so, yet
all in all equity markets have continued to hang tough,' said
Ryan Detrick, senior technical strategist at Schaeffer's
Investment Research in Cincinnati, Ohio. 'The rhetoric from
Washington is strong, but Wall Street is betting something
probably will get done.'
Gains in U.S. stocks helped European markets erase losses.
Top European shares on the FTSEurofirst 300 index last
traded 0.2 percent higher at 1134.83. The MSCI global stock
index rose 0.2 percent to 335.17.
Commodities markets rose on data from China that showed
factory output in the world's number two economy accelerated to
an eight-month high in November.
Copper prices hit their highest level in almost two
months, gold rose to around $1,714 an ounce, and Brent
oil snapped five straight days of losses to climb back above
$108 a barrel.
Brent futures jumped to $108.54 before easing back
to trade at $108.04, up $1.02. U.S. crude rose 56 cents
China's implied oil demand broke through the 10 million
barrel per day barrier for the first time ever in November, and
crude imports also rose, providing more evidence of economic
'The figures are another confirmation that Chinese oil
demand is accelerating again, and there are good reasons to
expect that it will carry on growing strongly next year,' said
Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
U.S. Treasury debt prices rose on concerns over the
protracted budget negotiations in Washington, political
rumblings in Italy, and expectations for further monetary policy
easing by the Federal Reserve when it meets this week.
The benchmark 10-year U.S. Treasury note was up 2/32 in
price, with the yield at 1.6147 percent.
The Fed is expected to announce a new round of Treasury
securities purchases at the end of its two-day meeting on
Wednesday, according to a Reuters poll. The bond buying would
replace the 'Operation Twist' stimulus, which expires at the end
(Additional reporting by Gertrude Chavez-Dreyfuss, Chris Reese
and Leah Schnurr; Editing by Leslie Adler)
((Wanfeng.Zhou@thomsonreuters.com)(+1 646 223 6304)(Reuters
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