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GLOBAL MARKETS-Stocks rebound after German ruling

Published 09/07/2011, 10:19 AM
Updated 09/07/2011, 10:24 AM
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* Gold drops more than 3.0 percent

* Swiss franc holds near central bank's target

* U.S. crude oil up more than 2.0 percent

(Updates prices, changes comment, byline, dateline from previous LONDON)

By Rodrigo Campos

NEW YORK, Sept 7 (Reuters) - Stocks on major world markets rose from a two-week low on Wednesday and gold tumbled from a record high after Germany's top court rejected lawsuits aimed at blocking Berlin's participation in bailout packages for Greece and other euro zone countries.

The ruling cleared the way for Germany to contribute more to the euro zone's rescue fund, but the constitutional court also gave the country's parliament a greater say over euro zone bailouts, potentially hampering the government's ability to act decisively against a two-year-old debt crisis.

"This (ruling) just falls in the category of modestly positive news. But when you have a market that is so geared to any new development, even modestly positive news can have a great effect," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

Though investors have periodically taken heart from signs that Europe has carved out a plan to deal with its sovereign debt crisis, confidence has been repeatedly undermined by delays and problems with implementing the plans.

"This is just a lot of fine tuning in terms of people not wanting to be too short or too long in a very volatile market," said Meckler.

The MSCI world equity index <.MIWD00000PUS> rose 2.0 percent a day after after hitting its lowest since Aug. 22. The index is still down 9.5 percent for the year.

The Dow Jones industrial average <.DJI> added 167.56 points, or 1.50 percent, to 11,306.86. The Standard & Poor's 500 <.SPX> gained 19.77 points, or 1.70 percent, to 1,185.01. The Nasdaq Composite <.IXIC> rose 42.33 points, or 1.71 percent, to 2,516.16.

European stocks <.FTEU3> gained 2.6 percent, having hit a two-year low in the previous day.

U.S. crude oil jumped 2.7 percent to $88.30 a barrel.

Gold prices tumbled more than 3.0 percent as the sharp rally in stock markets prompted investors to cash in gains after the precious metal's rally to record highs in the previous session. Spot gold dropped 3.6 percent to $1,813.31 around 10 a.m. in New York (1400 GMT).

The Swiss franc, which had been along with gold the safe haven of choice for investors, held within the 1.20 per euro target set on Tuesday by the Swiss central bank to weaken the franc and prevent a recession.

The euro was slightly firmer after the German court ruling in early New York trading, and the U.S. dollar index <.DXY> fell 0.45 percent against a basket of major currencies.

U.S. President Barack Obama is due to lay out a own job-creation package on Thursday and G7 finance ministers and central bankers meet in Marseilles, Frances this weekend to discuss measures to boost global economic growth.

"A lot of investors are thinking about the President's upcoming speech and whether or not he can say or do something that will be seen positively," Meckler said. "I don't think it will be bold enough, I don't think many investors want to be short before the speech."

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