* U.S. new home sales boost stocks, risk appetite
* Euro up versus dollar on upbeat European data
By Manuela Badawy
NEW YORK, July 26 (Reuters) - Stocks rose on Monday after
U.S. data showed a pick-up in new home sales, reviving hopes
for improvement in a tepid economic recovery, while the euro
firmed against the dollar on increased risk tolerance.
The euro climbed to $1.30, the highest since July 20, and
also received a boost as investors reacted to results of tests
of European banks' health released late on Friday.
Sales of single-family homes in June jumped 23.6 percent,
the largest increase since May 1980, from the prior month's
record low, pushing U.S. Treasury prices lower and supporting
oil prices. For details, see []
"There was a big revision down in the prior month, but then
obviously a rebound this month. We're still at these trough
levels, which we've been bouncing along. It's a good sign that
we did see an increase after the tax credit expired," Michael
O'Rourke, chief market strategist at BTIG LLC, New York.
O'Rourke referred to an Obama administration tax break to
home buyers to stimulate the economy, which has now expired.
The Dow Jones industrial average <> was up 67.06
points, or 0.65 percent, at 10,491.90. The Standard & Poor's
500 Index <.SPX> was up 9.37 points, or 0.85 percent, at
1,112.03. The Nasdaq Composite Index <> was up 18.67
points, or 0.82 percent, at 2,288.14.
U.S. stocks also got a lift from FedEx Corp <FDX.N> after
the bellwether raised its earnings outlook, sending its stock
up more than 4 percent. Stronger outlooks for transportation
firms like FedEx are seen as a sign of growing economic
demand.
European shares closed at a five-week high, helped by the
U.S. housing data, with the banking sector among the top
performers following the bank stress test results.
The tests were aimed partly at opening the door to funding
markets for a batch of southern European banks and lowering
costs for other lenders. []
Seven out of 91 banks failed the test, including five from
Spain and another 17 barely passed the EU tests which have been
widely criticised as not demanding enough.
The pan-European FTSEurofirst 300 <> index of top
shares closed 0.4 percent higher at 1,048 points.
World stocks as measured by MSCI <.MIWD00000PUS> were up 1
percent and the Thomson Reuters global stock index
<.TRXFLDGLPU> gained 0.93 percent.
After Friday's release of the European bank stress test
results and Monday's strong U.S. housing data for June, the
euro <EUR=> rose to $1.30 against the dollar, the highest since
July 20, on electronic trading platform EBS.
Investors were upbeat about a series of reports in the past
week showing the broader European economy was stronger than
thought.
Against the Japanese yen, the dollar <JPY=> was down 0.45
percent at 87.05, paring some of its losses after the U.S.
housing data.
Purchasing managers' indexes indicated third-quarter euro
zone growth of around 0.6-0.7 percent. German business
sentiment also posted a record jump in July to its highest
level in three years. And Britain, not in the euro zone, added
to the mix with an economy growing twice as fast as expected in
the second quarter.
"Despite the market's single-minded focus on the stress
tests, the more important story was the surprisingly strong
economic data from the region (last week)," said Boris
Schlossberg, a director for currency research at GFT in New
York.
U.S. Treasuries fell after the improvement in new home
sales data. Benchmark 10-year note <US10YT=RR> was down 6/32,
with the yield at 3.0196 percent. The 2-year U.S. Treasury note
<US2YT=RR> was down 2/32, with the yield at 0.6127 percent. The
30-year U.S. Treasury bond <US30YT=RR> was down 16/32, with the
yield at 4.0481 percent.
U.S. crude oil prices turned positive after the economic
data having been pressured earlier on Tropical Storm Bonnie's
fade from the Gulf of Mexico.
Oil <CLc1> was trading at around $79 a barrel, flat after
rising on the U.S. housing data. The price of gold <XAU=> fell
$6.45, or 0.54 percent, to $1182.10, as the metal lost some of
its safe-haven appeal, while European stress test results,
robust U.S. company earnings and vigorous euro zone data cut
into gold's appeal.
(Additional reporting by Vivianne Rodrigues, Ellen Freilich,
Ryan Vlastelica in New York; Editing by Kenneth Barry)
