Global stocks recover on Citigroup's earnings

By Herbert Lash

NEW YORK (Reuters) - The dollar traded near break-even and global equity markets rose on Monday, lifted by Citigroup's earnings and as investors put aside concerns about euro zone banks and took heart in a fresh round of merger and acquisition activity.

Citigroup Inc reported stronger-than-expected adjusted quarterly profit as its fixed-income business performed ahead of forecasts. The bank also announced a $7 billion settlement over its sale of flawed mortgage securities.

The settlement with the U.S. Justice Department was more than twice what many analysts had expected, but less than the $12 billion sought by the government.

Citigroup shares rose 3.0 percent to $48.42 in the second-biggest boost to the benchmark S&P 500 index, after Apple Inc.

Europe's biggest markets gained more than half a percent, helped by deal-making in the pharmaceutical sector and easing anxiety about the fallout from problems at Portugal's biggest listed bank.

"There's a bit of a snap-back from the Portugal hiccup," said Philip Orlando, chief equity market strategist at Federated Investors in New York. "And investors are starting to rethink what kind of earnings season we're going to have," he said.

MSCI's all-country world equity index rose 0.61 percent, while the FTSEurofirst 300 index of top European shares closed up 0.84 percent at 1,363.49.

The Dow Jones industrial average closed up 111.61 points, or 0.66 percent, to 17,055.42. The S&P 500 gained 9.53 points, or 0.48 percent, to 1,977.1 and the Nasdaq Composite added 24.929 points, or 0.56 percent, to 4,440.419.

The dollar drifted around the unchanged mark against most major currencies but edged higher against the Japanese yen as investors awaited congressional testimony on Tuesday by Federal Reserve Chair Janet Yellen on U.S. monetary policy. The dollar was up 0.18 percent against the yen at 101.54, while the euro rose 0.07 percent to $1.3617. The dollar index traded near break-even at 80.184.

U.S. Treasuries prices slipped on expectations Yellen could take a less accommodative stance on interest rates in her congressional testimony on Tuesday.

Benchmark 10-year U.S. Treasury notes were last down 7/32 in price to yield 2.5468 percent.

Brent crude oil steadied around $107 a barrel, close to its lowest in three months after weeks of sharp falls on signs of improving supply from key producers and weak demand in some consuming centers.

Brent crude settled 32 cents higher at $106.98. U.S. crude futures rose 8 cents to settle at $100.91 a barrel.

(Reporting by Herbert Lash; Additional reporting by Patrick Graham in London; Editing by Meredith Mazzilli, Dan Grebler, Chizu Nomiyama and Diane Craft)