Bloomberg News

U.S. Stocks, Dollar Advance on Trade Data as Euro Weakens

June 09, 2011

June 9 (Bloomberg) -- U.S. stocks rose for the first time in seven days and the Dollar Index climbed as the trade deficit narrowed amid record exports and the cheapest valuations of the year lured equity investors. The euro fell as traders scaled back bets on the pace of interest-rate increases.

The S&P 500 advanced 0.7 percent to 1,289.00 at 4 p.m. in New York after six straight days of losses, its longest slump since February 2009. The Stoxx Europe 600 Index gained 1 percent. The Dollar Index rose 0.3 percent after falling as much as 0.3 percent. The euro depreciated against 13 of its 16 major counterparts. Crude oil rose 1.2 percent after OPEC failed to reach an agreement on production targets, while corn rallied to a three-year high after the U.S. reduced its harvest forecast.

U.S. equities rebounded after the S&P 500 slumped 6.2 percent from an almost three-year high at the end of April through yesterday following disappointing data on jobs, manufacturing and consumer confidence. The slump left the index trading at 12.1 times forecast earnings for the next year, the cheapest since last summer, according to Bloomberg data.

“We’re due for a rally after miserable stock performance,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion. “People have been focusing on the negatives and have not been emphasizing the earnings momentum. Some stocks present good values again. It’s a good environment for investors to be positioning themselves.”

S&P 500 Rebound

The S&P 500’s rebound followed a 4.9 percent slide over the previous six days. Earnings are forecast to grow 20 percent this year for S&P 500 companies on 9.8 percent revenue growth, according to data compiled by Bloomberg.

Producers of raw materials and energy led gains among nine of the 10 main groups in the S&P 500 today, rising at least 1.2 percent. Monsanto Co. climbed 2.8 percent and CF Industries Holdings Inc. rallied 4.2 percent to pace gains among agricultural stocks after the U.S. Department of Agriculture said the nation’s corn harvest may be 2.3 percent smaller than forecast in May because of excessive Midwest rains.

Goldman Sachs Group Inc. climbed 1.5 percent after agreeing to pay a $10 million fine and stop holding private meetings of stock analysts and traders known as “huddles” to settle an investigation by Massachusetts’s chief securities regulator.

The U.S. trade gap shrank 6.7 percent to $43.7 billion, the lowest since December, Commerce Department figures showed. The gap was projected to widen to $48.8 billion from an initially reported $48.2 billion in March, according to the median forecast of 75 economists surveyed by Bloomberg. Exports increased 1.3 percent to $175.6 billion, boosted by sales of fuel oil, petroleum products and computers.

Economy Watch

A separate report showed that consumer confidence rose last week for the third consecutive time as lower gasoline prices lifted Americans’ outlook on their finances. The Bloomberg Consumer Comfort Index climbed to minus 45.9 in the period to June 5, the best showing since the end of April, from the prior week’s minus 47.1. Across income groups, sentiment improved the most among those making less than $50,000 a year.

Stocks climbed even after U.S. initial jobless claims unexpectedly rose last week, increasing by 1,000 to 427,000 in the week ended June 4, according to figures from the Labor Department. Economists forecast a drop to 419,000, according to a Bloomberg survey.

The yield on the 30-year Treasury bond rose four basis points to 4.22 percent. An auction of 30-year securities drew a yield of 4.238 percent, compared with the average forecast of 4.216 percent in a Bloomberg News survey of nine of the Federal Reserve’s 20 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount offered, was 2.63, compared with an average of 2.65 at the past 10 sales.

European Stocks

The Stoxx 600 also gained for the first time in seven days, led by basic-resource and chemical companies. Home Retail Group Plc plunged 14 percent after cutting its forecast for revenue at the Argos chain.

The euro weakened 0.5 percent to $1.4517 even as European Central Bank President Jean-Claude Trichet said “strong vigilance” is needed to contain inflation. The ECB left its main refinancing rate at 1.25 percent, matching expectations from all 52 economists surveyed by Bloomberg.

The euro erased an earlier advance versus the dollar and German government bonds fell after Trichet said the ECB hadn’t raised its 2012 inflation forecast from 1.7 percent, fueling speculation the bank won’t raise rates as quickly as previously expected. The 10-year German bund yield slipped two basis points to 3.03 percent.

Oil Climbs

Crude oil climbed 1.2 percent to $101.93 a barrel in New York after OPEC’s meeting in Vienna failed to reach an accord on output targets for the first time in at least 20 years. Saudi Oil Minister Ali al-Naimi said the meeting “was one of the worst meetings we’ve ever had.”

Corn futures for July delivery rose 21.5 cents, or 2.8 percent, to $7.855 a bushel on the Chicago Board of Trade. Earlier, the price reached $7.93, the highest for a most-active contract since June 2008. Cotton, cocoa and coffee also rallied.

The extra yield investors demand to hold Greek 10-year bonds instead of benchmark German bunds increased 54 basis points, while the similar-maturity Portuguese-German spread widened to 726 basis points, the most since at least 1997, when Bloomberg began collecting the data.

European Stocks

European governments and the International Monetary Fund would lend as much as an extra 45 billion euros ($66 billion) to Greece under the latest plan to avoid the euro area’s first sovereign default, two people with direct knowledge of the talks said. European estimates put Greece’s 2012-14 financing gap at as much as 170 billion euros, the people said. It would be filled by the loans, plus around 57 billion euros in unspent aid from last year’s bailout, roughly 30 billion euros in asset-sale proceeds and about 30 billion euros in rollovers by creditors.

The MSCI Emerging Markets Index dropped 0.2 percent. The Shanghai Composite sank 1.7 percent amid speculation the central bank will keep tightening monetary policy. South Korea’s Kospi Index retreated 0.6 percent before tomorrow’s central bank rate decision.

The New Zealand dollar strengthened against all 16 major peers, climbing 2 percent versus the yen, after the central bank said commodity prices remain “very strong” and that borrowing costs will need to increase in the next two years.

--With assistance from Claudia Carpenter, Michael Patterson, Andrew Rummer and Dan Tilles in London. Editors: Michael Regan

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To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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