Bloomberg News

Stocks Advance With Commodities While Dollar, Yen Weaken

May 21, 2012

Visitors pass through the main entrance of the London Stock Exchange Group Plc's headquarters in London. Photographer: Jason Alden/Bloomberg

Visitors pass through the main entrance of the London Stock Exchange Group Plc's headquarters in London. Photographer: Jason Alden/Bloomberg

Global stocks rebounded from the worst week since September and commodities snapped a three-day drop as China signaled it would support the economy and German and French officials said they would work to keep Greece in the euro. The yen and dollar weakened against most major peers.

The Standard & Poor’s 500 Index climbed the most in two months, surging 1.6 percent to 1,315.99 at 4 p.m. as takeover news also boosted stocks. Facebook (FB:US) Inc. tumbled below its $38 offering price. Ten-year Treasury yields added two basis points to 1.74 percent. The yen weakened against 15 of 16 major peers, while the dollar declined against 14. The S&P GSCI Index of 24 raw materials rebounded from its 2012 low, with oil up 1.2 percent to $92.57 a barrel and copper climbing 1 percent.

Concern Greece will exit the euro has erased about $4 trillion from global stock markets this month. China should adopt a “proactive fiscal policy and a prudent monetary policy” to bolster the economy, Premier Wen Jiabao said over the weekend. Germany will consider ways to spur European economic growth and do “everything necessary” to keep Greece in Europe’s currency union, German finance chief Wolfgang Schaeuble said after meeting with France’s Pierre Moscovici.

“Equity prices have gotten oversold,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. “A more positive tone regarding efforts to put together some growth- related initiatives in Europe is enough to give investors a pause from the selling pressure. In addition, any kind of talk about recognizing China’s slowdown that could lead to stimulus would be good for global activity.”

Rebound From Four-Month Low

The MSCI All-Country World Index of stocks rebounded 1.2 percent following last week’s 5.3 percent plunge, its worst since the week ending Sept. 23.

An 8.7 percent tumble in the S&P 500 from a four-year high on April 2 through last week left the benchmark index trading at 13.1 times its companies’ reported earnings, the lowest valuation since November, according to data compiled by Bloomberg. The index’s dividend yield at the end of last week was 2.17 percent while the rate on the 10-year Treasury note slid to 1.72 percent, with the ratio between the two at the highest since Oct. 3, the day the S&P 500 finished a 19 percent plunge from its 2011 high in April.

The S&P 500 surged the most in two months and rebounded from the lowest level since Jan. 17. Gauges of commodity, technology and industrial companies rose more than 2 percent to lead gains in nine of the 10 main industries. Boeing Co. (BA:US), Caterpillar Inc. and Hewlett-Packard Co. rose more than 2 percent for the biggest gains in the Dow Jones Industrial Average, which surged 135.10 points to 12,504.48.

Cooper Industries

Cooper Industries Plc surged 25 percent, the most in 11 years, after Eaton Corp. (ETN:US) agreed to buy the maker of electrical- distribution equipment for $11.8 billion. Radian Group Inc. surged 18 percent to lead a rally in mortgage insurers after investor Clinton Group Inc. pushed for a sale of the company.

Facebook, the social networking site that raised $16 billion in its initial public offering, fell 11 percent to $34.03, sinking below its $38 offer price in its second trading day. Nasdaq OMX Group Inc. (NDAQ:US) yesterday blamed “poor design” in the software it uses for driving auctions in initial public offerings after Facebook shares were plagued by delays and mishandled orders. Nasdaq OMX rose 3.6 percent, rebounding from a 4.4 percent tumble on May 18.

JPMorgan Chase & Co. (JPM:US) slipped for the sixth time in seven sessions, losing 2.9 percent to a five-month low of $32.51. The biggest U.S. bank by assets will suspend its daily stock repurchase program while maintaining the quarterly dividend (JPM:US), Chief Executive Officer Jamie Dimon said while discussing trading losses during an investor conference. The firm may face bigger losses on faulty bets in credit markets if Europe’s debt crisis worsens, according to one of the hedge funds that took the other side of the trades.

JPMorgan Trades

“They’re not out of those positions,” Michael Platt, co- founder and chief executive officer of BlueCrest Capital Management LLP, said today in an interview on Bloomberg Television’s “Inside Track.” “If we end up with a catastrophe in Europe in the short run, they’re probably not positions that anyone would want to have.”

Nickel, Brent crude and gasoline jumped more than 1.8 percent to lead gains in commodities. New York-traded oil rose for the first time in seven sessions, rebounding from a six- month low, amid bets China will boost growth and as Goldman Sachs Group Inc. said the balance between supply and demand is tightening.

Popolare Upgrades

Three shares gained for every one that fell in the Stoxx Europe 600 Index. (SXXP) Fiat SpA and Renault SA led automakers higher, jumping at least 4.7 percent. Banco Popolare SC (BP) climbed 19 percent as analysts from Bank of America Corp. to Exane BNP Paribas upgraded the shares after Italy’s fourth-biggest bank said regulatory approval to use internal risk models boosted its Tier 1 capital. Barclays Plc rose 2.2 percent after saying it planned to sell its entire holding of asset manager BlackRock Inc.

Credit-default swaps insuring European sovereign debt rose for a seventh day, with the Markit iTraxx SovX Western Europe Index of contracts on 15 governments climbing 6.9 basis points to 316.25, the highest since March. The euro increased 0.3 percent to $1.2813, rebounding from a four-month low.

Germany will consider all ideas on bolstering euro area growth, Finance Minister Wolfgang Schaeuble said as he and his French counterpart, Pierre Moscovici, sought to fashion a new strategy amid the Greek electoral impasse.

‘Everything on the Table’

“We will engage all ideas constructively and find solutions in order to strengthen sustainable growth,” Schaeuble said after meeting Moscovici for the first time today in Berlin. Moscovici, who became finance minister last week, said President Francois Hollandewants “everything on the table,” including joint euro-area bonds, at a meeting of European leaders two days from now.

The yen fell 0.4 percent against the dollar and lost 0.6 percent versus the euro. The yield on the 10-year Japanese government bond rose three basis point to 0.86 percent. Volatility on Japanese debt was the highest among developed markets, according to measures of 10-year bonds, two-and 10-year yield spreads and credit default swaps. The change in the nation’s 10-year yield was 2.9 times the 90-day average.

The Bank of Japan, which starts a two-day meeting tomorrow, expanded its asset-purchase program in February and April. Last week, two bond-buying operations failed to attract the central bank’s target for sell offers.

The MSCI Emerging Markets Index (MXEF) advanced 0.8 percent, increasing for the first time in seven days. The Shanghai Composite Index added 0.2 percent and South Korea’s Kospi index jumped 0.9 percent. Russia’s Micex Index rose 2.1 percent and Poland’s WIG20 Index climbed 1.4 percent. The Serbian dinar depreciated as much as 0.9 percent to a record low against the euro after Tomislav Nikolic, who advocates closer economic ties with Russia, took the lead in yesterday’s presidential vote.

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

  • FB
    (Facebook Inc)
    • $76.29 USD
    • 5.00
    • 6.56%
  • BA
    (Boeing Co/The)
    • $124.48 USD
    • -2.23
    • -1.79%
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