Bloomberg News

U.S., European Stocks Gain as Euro Rebounds After Slump

May 10, 2012

Traders work at the New York Stock Exchange (NYSE). Photographer: Scott Eells/Bloomberg

Traders work at the New York Stock Exchange (NYSE). Photographer: Scott Eells/Bloomberg

Stocks rose, with the Standard & Poor’s 500 Index rebounding from a two-month low, while European equities erased early losses and the euro snapped the longest slide since 2008 as Greece attempted to form a new government.

The S&P 500 added 0.3 percent at 4 p.m. in New York, with Cisco Systems Inc. leading a drop in technology companies that limited the market’s advance. The euro climbed 0.1 percent to $1.2947, halting an eight-day slump, and Spanish 10-year bond yields slid nine basis points after three days of gains. Oil snapped a six-day drop and copper gained 0.8 percent. S&P 500 futures dropped 0.6 percent at 4:56 p.m. as JPMorgan Chase & Co. (JPM:US) slumped 5.1 percent after saying (JPM:US) one of its divisions had “significant” mark-to-market losses.

Greece’s Evangelos Venizelos, the socialist Pasok leader and former finance minister, said his goal was to form a government that will ensure Greece remains in the euro area, following three days of political impasse. Deutsche Telekom AG and Repsol YPF SA (REP) rose in Europe and News Corp. rallied in New York after earnings beat estimates. First-time claims for U.S. jobless benefits fell last week to a one-month low, the Labor Department said.

“There’s an attempt to patch things together in Greece,” said Michael Strauss, who helps oversee about $27 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. “They will try to stay in the euro, though I’m not sure they can,” he said. “What’s also helping the market is that our earnings numbers have been good and the economy is doing OK. Today’s claims data seem to support that.”

Lowest Since March

The S&P 500 rebounded after closing yesterday at the lowest level since March 7. The benchmark index of U.S. stocks is down 4.3 percent from its four-year high last month, while still up 8 percent for the year. Jobless claims dropped by 1,000 to 367,000 in the period ended May 5, in line with the median forecast in a Bloomberg News survey and the lowest since the end of March, the Labor Department said.

Wells Fargo & Co. and SunTrust Banks Inc. rose at least 1.7 percent to pace gains in financial shares. Monster Beverage Corp. surged 9 percent after the energy-drink maker reported earnings that beat estimates. Cisco (CSCO:US), the biggest maker of computer-networking equipment, slumped 10 percent for its biggest drop in more than a year as sales and profit forecasts trailed analysts’ projections.

Ten-year Treasury rates added six basis points to 1.88 percent after the government auctioned the debt at a record-low yield yesterday.

Stronger Than Average

Treasuries remained lower even after stronger-than-average bidding at the auction of $16 billion in 30-year bonds. The securities drew a yield of 3.090 percent, compared with a forecast of 3.114 percent in a Bloomberg News survey of seven of the Federal Reserve’s primary dealers. The current 30-year yield rose three basis points to 3.05 percent. Treasuries rose yesterday as concern about Greece fueled demand for safer assets that pushed the yield at an auction of U.S. 10-year notes to a record low.

The Stoxx Europe 600 Index climbed 0.6 percent, after sinking 0.7 percent early in the session. Deutsche Telekom, Europe’s second-largest telephone company, and Repsol YPF SA, the Spanish oil company whose YPF SA unit was expropriated by Argentina, advanced 3 percent and 8.2 percent, respectively. Barratt Developments Plc (BDEV) rose 5.4 percent as the U.K.’s largest homebuilder by volume reported its best spring selling season in five years.

‘Very Supportive’

“Earnings continue being very supportive,” said Henk Potts, an equity strategist at Barclays Wealth in London, which oversees $239 billion. “Investors are no doubt spooked by the difficult macro environment but they should appreciate that corporate positions are an awful lot better than that.”

Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA, Spain’s biggest lenders, each climbed about 6 percent each as the government said it will take over Bankia SA (BKIA), the lender with the most Spanish real estate, as part of efforts to bolster confidence in the country’s lenders. Bankia slipped 1.2 percent to the lowest level since it started trading in July last year.

Spain’s IBEX 35 Index (IBEX) surged 3.4 percent, rebounding from an eight-year low.

JC Decaux SA, the French billboard company, tumbled 7.3 percent after saying the slowdown in Europe and China will hinder second-quarter revenue.

The euro strengthened versus 10 of 16 major peers, rebounding from the weakest level since January versus the euro and lowest since February versus the yen.

Odds of Abandonment

At least one country will abandon the euro by year-end, according to 57 percent of 1,253 investors, analysts and traders polled in a May 8 Bloomberg survey of subscribers. The results showed 80 percent expected more pain for Europe’s bond markets and a majority identified a deterioration in Europe as a large threat to the world economy.

The European equity benchmark yesterday fell yesterday to its lowest level in almost four months as Greece’s politicians struggled to agree on a government.

Venizelos, Greece’s former finance minister, received a three-day mandate from President Karolos Papoulias today to attempt to form a coalition government. Alexis Tsipras, the leader of the left-wing Syriza coalition, yesterday abandoned his attempt to form a government, forcing Papoulias to turn to Pasok, which came third in the elections.

Australia’s dollar rallied against 15 of 16 major peers, strengthening 0.4 percent versus its U.S. counterpart, after a report showed the nation’s unemployment rate unexpectedly dropped to a one-year low.

Bank of England

The pound gained 0.2 percent against the dollar as the Bank of England halted stimulus expansion after seven months of bond purchases and kept its benchmark rate unchanged, in line with forecasts in Bloomberg surveys.

The S&P GSCI Index of 24 raw materials fell for a seventh straight day, its longest slump since August, as cotton slumped 4.7 percent while corn slid more than 3 percent led after the U.S. government forecast an increase in stockpiles. Oil increased 0.3 percent to $97.08 a barrel.

Copper rallied amid speculation China, the world’s biggest consumer of the metal, will move to spur growth after exports and imports climbed less than economists estimated. Exports from China gained 4.9 percent from a year earlier in April and imports were up 0.3 percent, customs figures showed today. Economists surveyed by Bloomberg News predicted respective increases of 8.5 percent and 10.9 percent. The import figure “is likely to lead to further elevated fiscal spending and monetary easing,” Credit Agricole SA said in a report.

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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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $60.34 USD
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  • CSCO
    (Cisco Systems Inc)
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