Bloomberg News

U.S. Stocks Rise on Greece Optimism; Oil Erases Advance

May 29, 2012

A trader works at the New York Stock Exchange (NYSE) in New York. Photographer: Scott Eells/Bloomberg

A trader works at the New York Stock Exchange (NYSE) in New York. Photographer: Scott Eells/Bloomberg

U.S. stocks rose, adding to last week’s rally, amid speculation Greece will stay in the euro after polls showed voters supporting politicians who back the nation’s bailout. Commodities erased earlier gains while Treasuries were little changed.

The Standard & Poor’s 500 Index added 1.1 percent at 4 p.m. in New York, adding to last week’s 1.7 percent gain. The Stoxx Europe 600 Index (SXXP) climbed 0.8 percent and the MSCI Emerging Markets Index jumped 1.4 percent. The Dollar Index, a gauge of the currency against six major peers, was little changed even as the euro weakened 0.3 percent to an almost two-year low of $1.2504. Ten-year Treasury yields increased less than one basis point to 1.75 percent, erasing earlier declines. The S&P GSCI Index of commodities lost 0.5 percent.

U.S. equities gained after Greece’s New Democracy party placed first in all six opinion polls published on May 26 as campaigning continued for the general election on June 17. U.S. markets were closed yesterday for the Memorial Day holiday. Home values in 20 U.S. cities fell in the 12 months ended March at the slowest pace in more than a year, a report showed today, while the Conference Board’s gauge of consumer confidence unexpectedly dropped.

“There’s also a bit of relief that we won’t have any imminent kicking-out or defaulting of Greece,” Brad Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab Corp., said in a phone interview. His firm has $1.83 trillion in client assets. “We’re definitely seeing signs of stabilization on the housing front. The economy is looking decent. Relatively speaking, the U.S. is a good place to be.”

‘Old Way’

Stocks also rose amid speculation China will do more to stimulate its economy. The nation has no plans to introduce measures on the scale deployed during the global financial crisis, the official Xinhua News Agency reported.

“The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said today in the seventh paragraph of a Chinese-language article on economic policy, without attributing the information. “The current efforts for stabilizing growth will not repeat the old way of three years ago.”

The S&P 500 increased for the fifth time in six trading sessions. The index on May 25 capped its first weekly rally since April, jumping 1.7 percent, as investors were lured by the cheapest valuations since November.

Rebound After Slump

Equities rebounded after a three-week, 7.7 percent decline pushed the S&P 500’s price-to-earnings ratio to 13.1 on May 18, below the average of 16.4 since 1954, according to data compiled by Bloomberg. The benchmark gauge started today’s session down 5.7 percent in May, heading for its biggest monthly retreat since September, amid concern global economic growth is slowing and Greece may leave the euro area.

Indexes of commodity, technology and financial companies led gains among all of the 10 main industries in the S&P 500 today, rising at least 1.4 percent. Caterpillar Inc., Alcoa Inc. and Bank of America Corp. rose more than 2.8 percent for the biggest gains in the Dow Jones Industrial Average.

Facebook Inc. (FB:US) shares fell to a new low, extending losses from the worst-performing large initial public offering during the past decade to more than 20 percent. The stock fell 9.6 percent to $28.84. Facebook options trading began today, with volume for puts exceeding calls by 1.2-to-1, data compiled by Bloomberg show. More than 202,000 puts giving the right to sell traded. June $30 puts were the most-active contracts, with volume approaching 24,000.

The S&P/Case-Shiller index of property values fell 2.6 percent from a year earlier after a 3.5 percent drop in February, the group reported today in New York. The decline matched the median forecast of economists surveyed by Bloomberg News. The Conference Board’s consumer confidence index decreased to 64.9 this month from 68.7. Economists forecast an increase to 69.6, according to the median estimate in a Bloomberg survey.

European Shares

Three stocks rose for every one that fell in the Stoxx 600. CGGVeritas, the world’s largest seismic surveyor of oilfields, and ArcelorMittal (MT), the biggest steelmaker, rose more than 4 percent as analysts upgraded the shares. Greggs Plc, a U.K. baker, jumped 8.1 percent as Chancellor of the Exchequer George Osborne reversed a plan to add value-added tax to some snacks.

Bankia SA (BKIA) led a decline in Spanish stocks, sliding 16 percent. Spain backtracked on a plan to use government debt instead of cash to bail out Bankia, as Prime Minister Mariano Rajoy struggles to shore up the nation’s lenders without overburdening public finances.

Bankia Bailout

An Economy Ministry spokesman said yesterday that the government was considering using an injection of treasury debt instead of cash to recapitalize BFA-Bankia, as laid out in legislation approved in February. Spanish bond yields rose and investors criticized the idea, which the spokesman, speaking anonymously under ministry policy, said today had become a “marginal” option for the 19 billion-euro ($24 billion) rescue.

Spain’s 10-year yield decreased three basis points to 6.45 percent today after surging 17 points yesterday. The nation’s two-year yield increased 16 basis points to 4.63 percent today, rising for the third straight day. Spain’s sovereign credit rating today was cut by Egan-Jones Ratings Co. to B from BB- on the country’s deteriorating economic outlook.

Volatility on Japanese bonds was the highest in developed markets today, according to measures of 10-year debt, the two- and 10-year yield spread and credit-default swaps. The yield on the 10-year security dropped 3 basis points to 0.85 percent.

‘Ultimate Arbiter’

The euro weakened against 13 of 16 major peers, losing 0.9 percent versus the Mexican peso and 0.7 percent against the South African rand. Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia, said euro-area authorities will do all they can to prevent a breakup of the 17-nation currency bloc.

“While you could make the case that Greece should leave because it gets its currency flexibility back, the ultimate arbiter will be political considerations,” Roach said in an interview with Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance” today. “On that basis, Greece will stay in and European leaders will do everything in their power to keep the monetary union intact.”

The S&P GSCI gauge of 24 commodities decreased 0.5 percent, reversing a gain of as much as 0.9 percent. Crude in New York slipped 10 cents to $90.76 a barrel after climbing as much as 1.5 percent. Natural gas fell 5.4 percent, bringing its decline since May 23 to more than 11 percent, on forecasts for cooler weather that would curb demand for fuel at power plants.

Emerging-market stocks gained for a fourth day. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong climbed 2.2 percent. Taiwan’s Taiex jumped 2.9 percent and South Korea’s Kospi Index added 1.4 percent. Russia’s Micex Index advanced 2.8 percent.

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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