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Euro after four month high after German rulingUS-MARKETS-GLOBAL:Euro after four month high after German ruling
By Ellen Freilich
NEW YORK (Reuters) - The euro saw a new four month high on Wednesday after Germany's top court gave a green light to Europe's new bailout fund, while hopes for more monetary stimulus from the Federal Reserve at its Thursday meeting supported stocks in U.S. and Europe.
Germany's Constitutional Court cleared the way for the country to ratify the European Stability Mechanism (ESM), boosting hopes that the single currency bloc is finally putting in place the tools to resolve its three-year old debt crisis.
"Today's positive ruling from the court solidifies the view that European officials are getting control over the sovereign debt crisis," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
The euro climbed to $1.2936, its highest since mid-May. The currency has recovered more than 7.0 percent from a two-year low of around $1.2040 in July, after the European Central Bank's pledge to do whatever it takes to preserve the euro zone.
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.
The MSCI global share index <.MIWD00000PUS>, up 6.5 percent since the end of July, hit a five-month high of 332.42 points before dipping back a bit as profit-taking set in.
The Dow Jones industrial average <.DJI> was up 33.48 points, or 0.25 percent, at 13,356.84. The Standard & Poor's 500 Index <.SPX> was up 3.34 points, or 0.23 percent, at 1,436.90. The Nasdaq Composite Index <.IXIC> was up 3.04 points, or 0.10 percent, at 3,107.57.
On Wall Street, Apple Inc <AAPL.O> will be in focus when it unveils its newest iPhone, widely expected to offer 4G wireless technology for the first time and a 4-inch display, bigger than the current 3.5 inches. Apple shares slipped 0.02 percent to $660.42 in early trade.
Facebook Inc <FB.O> rose 5.98 percent to $20.58 in premarket trading after CEO Mark Zuckerberg soothed investors in his first major public appearance since the No. 1 social network's rocky IPO in May; he hinted at new growth areas from mobile to search.
In bond markets, the news from Europe removed some need for safe haven investments leading U.S. Treasuries and German bunds prices to fall.
The benchmark 10-year Treasury note fell 15/32 in price and its yield rose to 1.75 percent from 1.71 percent late Tuesday.
Flanagan said the Treasury's upcoming 10-year note auction also weighed on U.S. debt prices.
"The German constitutional court approval removes some of the safety premium," said Kevin Flanagan, chief fixed-income strategist at Morgan Stanley Smith Barney with $1.7 trillion in assets under management.
Bund futures fell to their lowest level since July. In contrast, Spanish and Italian bonds rallied, with yields down 10 and 6 basis points, respectively.
(Additional reporting by Marc Jones in London and Chuck Mikolajczak in New York)
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