Stocks (MXWO) rose for a second day as U.S. home sales increased and speculation grew that leaders in China and Europe will do more to support economic growth. Spanish bonds rallied, while Treasuries, German bunds and the yen fell.
The MSCI All-Country World Index added 0.8 percent at 3:03 p.m. in New York and the Standard & Poor’s 500 Index rose 0.4 percent, adding to its biggest gain in two months. The yen depreciated 1 percent against the dollar after Fitch Ratings downgraded Japan’s debt. Crops led commodities lower while oil retreated as Iran agreed to let Western nuclear inspectors into the country. Ten-year Treasury yields rose for a third day.
U.S. equities extended gains after the National Association of Realtors said sales of existing homes increased in April for the first time in three months, adding to signs the housing market is recovering. China plans to speed up approval of infrastructure projects and allocate construction funding faster to improve growth, the China Securities Journal reported. Fitch cut Japan’s rating to A+ with a negative outlook.
“We’re getting some refocus back on economic news,” said Michael Strauss, who helps oversee about $27 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. “There’s a real turn happening in the U.S. housing sector. It seems to be a done deal that China will stimulate growth. There’s also some hope regarding the meeting taking place in Europe tomorrow.”
The S&P 500 surged 1.6 percent yesterday, the biggest gain since March 13, after German Finance Minister Wolfgang Schaeuble said yesterday that European leaders will do “everything necessary” to keep Greece in the 17-nation euro and focus on steps to aid economic expansion.
An S&P index of 12 homebuilders rallied 3 percent and is up 6 percent in two days. PulteGroup Inc. and Lennar Corp. rallied more than 3 percent to pace gains today. Purchases of previously owned homes increased 3.4 percent to a 4.62 million annual rate, according to figures from the Realtors association, adding to signs the industry is stabilizing.
JPMorgan Chase & Co. (JPM:US) jumped 6.2 percent, rebounding from a 20 percent plunge following its May 10 disclosure of at least $2 billion in trading losses from credit derivatives. Wells Fargo & Co., Citigroup Inc. and Bank of America Corp. also rose at least 1.9 percent, sending financial shares to the biggest advance among 10 industries in the S&P 500.
Facebook Inc. (FB:US) lost 6.9 percent to $31.70, extending yesterday’s 11 percent plunge, in the social network’s third day of trading after selling shares at $38 in the biggest initial public offering for an Internet company.
The Stoxx Europe 600 Index increased 1.9 percent. Rio Tinto Group and Renault SA (RNSDF:US) led gains in mining companies and automakers, rising at least 4 percent. Homeserve Plc (HSV), the U.K. provider of emergency-repair services that suspended telephone sales and marketing in October after a review showed they didn’t meet its standards, plunged 29 percent after saying the Financial Services Authority will investigate “certain historic issues.”
European stocks held gains after the Organization for Economic Cooperation and Development said Europe’s debt crisis risks spiraling and seriously damaging the world economy.
European leaders are scheduled to meet in Brussels tomorrow. German Chancellor Angela Merkel said she won’t shy away from disagreeing with French President Francois Hollande, saying good cooperation “doesn’t exclude differing positions.” France isn’t out to create conflict and will welcome “all the tools, all the proposals” at the meeting, Hollande said.
The German 10-year bund yield added four basis points to 1.47 percent, while similar-maturity Spanish bond yields slid 20 basis points after the government beat its maximum target at an auction today.
Spain’s two-year note yield slid 17 basis points, and the cost of insuring the country’s debt against default dropped 28 basis points to 527. Spain sold 2.53 billion euros ($3.2 billion) of bills, more than its maximum target of 2.5 billion euros. The Italian two-year note yield tumbled 17 basis points.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments declined 5.4 basis points to 310.5. In addition to Spain, the Netherlands sold 3 billion euros of 2015 notes today, and the European Financial Stability Facility sold 1.478 billion euros of 182-day bills as borrowing costs fell.
The yen weakened against all 16 of its most-traded peers, extending declines after Fitch cut Japan’s rating by one step because of the nation’s “leisurely” efforts to tackle the world’s biggest public debt burden.
The Bank of Japan started a two-day meeting, with seven out of 14 economists surveyed by Bloomberg News saying they expect the central bank to bolster monetary stimulus by July and none predicting action at the end of the meeting tomorrow. The Bank of Japan increased planned bond purchases a month ago.
The euro weakened 0.8 percent to $1.2720, declining against all but three of its 16 major counterparts. The Dollar Index (DXY) rose for the first time in three days, adding 0.5 percent. The pound fell 0.4 percent versus the dollar as U.K. inflation slowed and the International Monetary Fund said more stimulus such as quantitative easing is needed to boost the economy.
The 10-year U.S. Treasury yield rose five basis points to 1.79 percent. The 30-year yield jumped as much as nine basis points to 2.895 percent. Treasuries remained lower after the U.S. sold $35 billion in two-year notes. The securities drew a yield of 0.30 percent, matching the average forecast in a Bloomberg News survey of nine of the Federal Reserve’s 21 primary dealers.
Norway’s krone appreciated 0.5 percent versus the euro after a report showed the nation’s economy grew more than economists forecast in the first quarter as investments in offshore oil and gas fields allowed Europe’s second-largest crude exporter to evade the region’s debt crisis.
The S&P GSCI Index of 24 commodities retreated 0.9 percent as corn, cotton, sugar and cocoa fell more than 2.6 percent to lead declines. Oil slipped 1 percent to $91.66 a barrel as Iran agreed to let Western nuclear inspectors into the country, easing concern that the conflict over its atomic energy program will disrupt supplies.
The MSCI Emerging Markets Index (MXEF) added 0.5 percent. The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong advanced 1.2 percent and the Shanghai Composite Index (SHCOMP) increased 1.1 percent. Industrial stocks led the advance with Anhui Conch Cement Co., the biggest Chinese cement producer, jumping 3.5 percent. Benchmark gauges in South Korea, Taiwan and Hungary climbed at least 0.9 percent while India’s Sensex lost 1 percent.
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