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GLOBAL MARKETS-Stocks bounce back despite Italy angst; dollar dips

Published 2018-10-19, 11:25 a/m
© Reuters.  GLOBAL MARKETS-Stocks bounce back despite Italy angst; dollar dips

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

* Italian 10-yr bond yield at 4-1/2-yr high; spread to Bunds jumps

* Euro recovers after falling to 2-month low

By Rodrigo Campos

NEW YORK, Oct 19 (Reuters) - Stocks rose across the world on Friday with a global index aiming to avoid a fourth consecutive weekly loss, but concerns over Italy's budget weighed on its stocks and bonds.

The benchmark Italian bond yield rose to 4-1/2 year highs and the euro touched a 10-day low before rebounding as the European Union called Rome's draft budget an "unprecedented" breach of EU fiscal rules. selling of Italian assets subsided after European Economics Commissioner Pierre Moscovici said he wanted to reduce tensions with Italy over its 2019 budget. closely watched Italian/German bond yield spread touched a 5-1/2 year high of 338 basis points. DE10IT10=RR

But stocks in China and the United States rose a day after posting sharp losses, putting a global stock index on track to post its first positive week in four.

Strong earnings boosted shares on Wall Street as traders set aside concerns over growth in China and Europe, as well as political tension between the West and Saudi Arabia, the world's largest oil exporter.

Fallout from the disappearance of Saudi journalist Jamal Khashoggi, last seen entering the Saudi consulate in Istanbul early this month, has compelled King Salman to intervene despite having given his son, Crown Prince Mohammed bin Salman, vast powers. have been macro concerns but results have been the biggest driver this week, and today is no different," said Art Hogan, chief market strategist at B. Riley FBR in New York.

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In late-morning trade, the Dow Jones Industrial Average .DJI rose 181.21 points, or 0.71 percent, to 25,560.66, the S&P 500 .SPX gained 21.83 points, or 0.79 percent, to 2,790.61 and the Nasdaq Composite .IXIC added 63.43 points, or 0.85 percent, to 7,548.57.

The pan-European STOXX 600 index .STOXX rose 0.15 percent and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1.21 percent.

Italy's benchmark 10-year bond yield IT10YT=RR rose as high as 3.783 percent in early trade on Friday, the highest since February 2014. It last traded at 3.563 percent.

Italian stocks .FTMIB were last trading flat on the day, while its bank stocks .FTIT8300 were last down -0.6 percent.

Italy is the third-largest economy in the 19-country euro zone, and a crisis there could unsettle the entire bloc.

Emerging market stocks lost 1.30 percent. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.68 percent lower.

In currencies, the British pound rose after EU negotiator Michel Barnier said a Brexit deal with the United Kingdom was 90 percent done although hurdles remained. GBP/ GBP= was last trading at $1.3039, up 0.17 percent on the day.

The euro recovered from one-week lows against the U.S. dollar as investors took profits on bets against the bloc's currency.

The dollar index .DXY fell 0.12 percent, with the euro EUR= up 0.38 percent to $1.1496.

“The market has added to shorts considerably during the week and so I'm not surprised that the down move ended today,” said Greg Anderson, global head of foreign exchange strategy for BMO Capital Markets in New York.

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He said traders are “taking profit on a short that's worked for them.”

The Japanese yen weakened 0.29 percent versus the greenback at 112.56 per dollar.

Oil prices rose on signs of surging demand in China, but the market remained concerned over rising U.S. inventories and trade wars that could curb economic activity.

U.S. crude CLc1 was up 87 cents, or 1.3 percent, at $69.52 per barrel and Brent LCOcv1 was last at $80.15, up 86 cents, or 1.1 percent, on the day.

U.S. Treasury yields rose as stocks rose on Wall Street.

Benchmark 10-year notes US10YT=RR last fell 7/32 in price to yield 3.1996 percent, from 3.175 percent late on Thursday.

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