Bloomberg News

U.S. Stock Futures Rise on Optimism ECB Will Act on Debt Crisis

December 06, 2011

Dec. 6 (Bloomberg) -- U.S. stock futures rebounded from earlier losses on speculation that the European Central Bank will take more steps to contain the debt crisis after Standard & Poor’s put 15 euro-area nations on credit-rating review.

United Technologies Corp. and Caterpillar Inc. advanced in Germany. Microsoft Corp., the world’s biggest software maker, rose in early New York trading.

Futures on the S&P 500 expiring this month climbed 0.4 percent to 1,259.4 at 7:34 a.m. in New York, after dropping as much as 0.8 percent. The Dow Jones Industrial Average contract added 47 points, or 0.4 percent, to 12,113 points.

The S&P 500 yesterday increased 1 percent, extending its best weekly gain since March 2009. Improving U.S. economic data reduced concern that the debt crisis will threaten the recovery in the world’s largest economy. Germany and France said they will push for rewriting European Union rules to enforce stricter budget discipline, at a regional summit on Dec. 9 in Brussels.

The statement from S&P “should add a little more urgency to politicians to find a solution,” Yusuf Heusen, a sales trader at IG Index in London, wrote in e-mailed comments. “It does feel as if investors are happy for now to give politicians a few more days and await the outcome of this Friday’s latest euro meeting.”

ECB President Mario Draghi will probably cut the benchmark interest rate a quarter point to buoy the economy when policy makers meet Dec. 8, according to 58 economists in a Bloomberg survey.

Fiscal Union

German Chancellor Angela Merkel and French President Nicolas Sarkozy said after the S&P statement that they “reinforce their conviction” that common proposals for closer fiscal union in the EU will lead the way out of the crisis.

Germany, France and four other euro-area nations may lose their AAA credit ratings depending on the result of the summit of European Union leaders on Dec. 9, S&P said yesterday after the close of markets. The ratings company put 15 euro nations on review for possible downgrade.

“Systemic stress in the euro zone has risen in recent weeks and reached such a level that a review of all euro-zone sovereign ratings is warranted,” S&P said in a statement.

Bailout Fund

Downgrades of Germany and France would affect the rating of the European Financial Stability Facility, the bailout fund for struggling euro-member countries that has funded rescue packages for Greece, Ireland and Portugal partially through bond sales. If the EFSF has to pay higher interest on its bonds, it may not be able to provide as much funding for the most-indebted nations.

“The stakes have been raised for this week’s EU summit following the warning from S&P,” Jonathan Sudaria, a trader at London Capital Group, wrote in a note today. “Any failure by European policy makers to reach an agreement -- or if they produce another unsatisfactory plan -- could see swift action from the ratings agency.”

German Finance Minister Wolfgang Schaeuble said S&P’s threat to downgrade credit ratings across Europe will encourage leaders meeting in Paris to make the right decisions to resolve the financial crisis. European countries cannot avoid cutting their debts, Schaeuble said today at a panel discussion in Vienna.

United Technologies climbed 0.5 percent to $77.04 in Germany. Caterpillar, the world’s largest maker of construction and mining equipment, advanced 0.8 percent to $97.59.

Microsoft added 0.2 percent to $25.76 in early New York trading.

--Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net.


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