Bloomberg News

Stocks Rise, Euro Strengthens on Greece Optimism; Oil Sinks

June 17, 2011

June 17 (Bloomberg) -- Stocks rose and U.S. benchmark indexes snapped a six-week slide, while the euro climbed, on signs of progress for a Greek rescue and improvement in a gauge of economic indicators. Oil slid to a four-month low.

The S&P 500 added 0.3 percent to 1,271.50 at 4 p.m. in New York, leaving it up less than 0.1 percent for the week. The Stoxx Europe 600 Index rose 0.2 percent. The euro gained 0.7 percent to $1.4302. Greek bonds surged, while Treasuries pared their earlier losses, with the 10-year note’s yield up less than one basis point at 2.94 percent. Oil sank 2 percent to $93.01 a barrel, helping send the S&P GSCI index of 24 commodities down for a third day to its lowest level in four months.

U.S. equities advanced for a fourth day this week as German Chancellor Angela Merkel said today she’ll work with the European Central Bank to resolve the crisis, suggesting she’ll temper a demand that bondholders shoulder a “substantial” share of Greek aid. Stocks extended early gains as the Conference Board’s index of leading economic indicators climbed at more than twice the rate forecast by economists.

“Somebody is going to have to give the Greeks a hand or they will default,” said David Kelly, who helps oversee about $445 billion as chief market strategist for JPMorgan Funds in New York. “Having stared over the precipice of another financial crisis, the Germans have realized the implications of it. The Europeans are capable of reducing uncertainty coming out of Greece. Over the next few months we’ll see better economic numbers. That should push the stock market higher.”

Almost $4 trillion has been erased from the value of global equities since this year’s peak on May 1, amid signs the U.S. economy was struggling to rebound and concern that Greece’s credit crisis may spread.

Threatening 2011 Gain

The S&P 500 has fallen 6.8 percent from an almost three- year high at the end of April. The slump followed reports showing business activity cooled more than forecast, sales of existing homes unexpectedly dropped and growth in industrial production stopped. The decline threatened the 2011 gain for the S&P 500 and drove its valuation this week to as low as 12.7 times estimated earnings for 2011, the cheapest level in almost a year. The index ended today with a 1.1 percent year-today advance.

The gain today in U.S. stocks erased what potentially would have been a seventh straight weekly loss for the S&P 500, the longest slump in a decade. The Conference Board’s LEI signaled that economic growth may pick up by the end of 2011. The gauge of the outlook for the next three to six months rose 0.8 percent after a revised 0.4 percent decline in April. Economists forecast a 0.3 percent gain, according to the median estimate in a Bloomberg News survey.

Consumer Confidence

Stocks maintained gains in morning trading even after the Thomson Reuters/ University of Michigan preliminary index of consumer sentiment in the U.S. fell to 71.8 in June from 74.3 a month earlier, trailing the median projection of 74 in a Bloomberg News survey of economists.

The S&P 500 briefly erased its gain in the final hour of trading after Moody’s Investors Service said it may cut Italy’s credit rating, spurring concern Europe’s debt crisis will worsen. The benchmark index resumed its advance after turning negative for less than a minute.

JPMorgan Chase & Co., Microsoft Corp. and AT&T Inc. climbed at least 1 percent to help lead gains in the Dow Jones Industrial Average.

Research In Motion Ltd., the maker of the BlackBerry smartphone, sank 21 percent for its biggest drop in Nasdaq Stock Market trading since 2008 after forecasting second-quarter revenue and profit that missed analysts’ estimates. The company said it will cut jobs as a lack of new models prompts consumers to buy rival devices.

European Shares

About three stocks rose for every one that declined in the Stoxx 600. National Bank of Greece SA jumped 8.5 percent, and Societe Generale SA climbed 2.5 percent.

Carrefour SA sank 1.7 percent after the world’s second- biggest retailer by sales said results in France failed to meet its expectations. Celesio AG tumbled 15 percent as Europe’s biggest drug wholesaler said its profit may drop.

The euro strengthened against all but two its 16 most- traded counterparts, advancing 0.8 percent versus the Swiss franc. European Union finance ministers agreed on June 14 to convene again on June 19 after failing to hammer out a deal on fresh aid to Greece. French President Nicolas Sarkozy said a “breakthrough” had been made on the Greek debt crisis following a meeting with Merkel today.

‘Voluntary Basis’

“We would like to have a participation of private creditors on a voluntary basis,” Merkel told reporters in Berlin at a press conference with Sarkozy. “This should be worked out jointly with the ECB. There shouldn’t be any dispute with the ECB on this.”

Greek Prime Minister George Papandreou earlier named Evangelos Venizelos as finance minister in a Cabinet overhaul aimed at fending off a party rebellion and passing austerity measures. Former Federal Reserve Chairman Alan Greenspan said yesterday a Greek default is “almost certain” and may drive the U.S. into recession.

The Greek two-year note yield fell 90 basis points to 28.79 percent, after earlier rising to 29.77 percent. The cost of insuring the country’s debt fell, with credit-default swaps on Greece at 1,932.75 basis points as of 4:30 p.m. in London, retreating from a record 2,237 basis points yesterday, according to CMA. The Portuguese two-year debt yield decreased five basis points to 13.03 percent, while Irish yields fell 28 basis points.

The GSCI index of commodities fell 0.8 percent, slipping for a third day and reaching the lowest since February, on declines in oil, gasoline and heating oil.

Crude oil reached the lowest level in almost four months in New York. U.S. oil supplies rose to the highest level in 31 years for the month of May as refineries processed less crude amid a decline in gasoline demand, according to the American Petroleum Institute.

The MSCI Emerging Markets Index fell 0.3 percent, set for the lowest close since March 18. The FTSE/JSE Africa All Shares Index retreated 1.1 percent after South African markets were closed yesterday for a holiday, while Russia’s Micex Index tumbled 1.5 percent.

--With assistance from Adria Cimino in Paris and Claudia Carpenter, Michael Patterson, Will Hadfield, Michael Shanahan, Daniel Tilles and Alexis Xydias in London. Editors: Jeff Sutherland, Michael Regan

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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