Global stocks and the euro surged the most this year, oil had its biggest gain since 2009 and Spanish bonds rallied after European leaders reached an agreement that eased concern banks will fail.
The MSCI All-Country World Index climbed 3 percent, the most since November (MXWD), while the Standard & Poor’s 500 Index advanced 2.5 percent to cap its best June since 1999. The euro appreciated 1.7 percent against the dollar and rallied as much as 2 percent, the most since Oct. 27. Spain’s two-year yield plunged more than a full percentage point. The S&P GSCI gauge of 24 commodities rose 5.6 percent, its biggest gain since April 2009, as oil surged 9.4 percent to $84.96 a barrel.
After talks ended at 4:30 a.m. in Brussels today, leaders of the 17 euro countries dropped requirements that taxpayers get preferred creditor status on aid to Spain’s banks and opened the way to recapitalize lenders directly, while relaxing conditions on potential help for Italy. Before today, more than $4.9 trillion had been erased from global equities this quarter amid concern a worsening debt crisis will stifle the global recovery.
“It’s a relief rally,” said Ann Miletti, fund manager for Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. Her firm manages $201 billion. “The agreement at least brings some clarity and stabilization in the short term. More positive news out of Europe is all you need in a market that’s been depressed given all the uncertainty out there.”
The gain in the S&P 500 today was its biggest since Dec. 20 and trimmed its retreat for the quarter to less than 3.3 percent. The index rose 4 percent in June and 2 percent for the week.
Constellation Brands Inc. (STZ:US) rallied 24 percent, the most since at least 1986, after agreeing to buy the other half of its Crown Imports joint venture with Grupo Modelo SAB for about $1.85 billion, becoming the sole U.S. importer of top-selling Corona beer. Bank of America Corp., Cisco Systems Inc. and United Technologies Corp. surged more than 4 percent to lead gains in the Dow Jones Industrial Average, which rallied 277.83 points to 12,880.09.
Research In Motion Ltd. plunged after 19 percent in New York trading after posting a loss and delaying the next BlackBerry operating system.
Stocks rallied even as Commerce Department data showed U.S. consumer spending stalled in May, with household purchases, which account for about 70 percent of the economy, unchanged after a 0.1 percent increase the previous month. The median estimate of 75 economists surveyed by Bloomberg News called for no change in so-called nominal sales.
The Institute for Supply Management-Chicago Inc.’s business barometer showed business activity in the U.S. unexpectedly expanded in June at a faster pace as production and employment rebounded. The index increased to 52.9, topping the median estimate of 52.3. The Thomson Reuters/University of Michigan final index of sentiment fell to 73.2, trailing the median estimate of 74.1.
The yield on the 10-year U.S. Treasury note advanced seven basis points to 1.65 percent, leaving the rate 23 basis points lower this year.
The Stoxx 600 (SXXP) advanced the most since November and extended this month’s rally to 4.8 percent. The gauge still retreated 4.6 percent in the quarter. National Bank of Greece SA, Bank of Ireland Plc and UniCredit SpA surged at least 13 percent to lead gains in 45 of 46 lenders in the index.
After markets closed in Europe, Germany’s lower house of parliament approved the euro-area’s permanent bailout fund, the European Stability Mechanism. The measure won a two-thirds majority in the chamber.
The MSCI Asia Pacific Index rose 2 percent, reversing a 0.4 percent drop after the agreement was announced. Stocks fell earlier as a report showed Japan’s factory output dropped the most since the March 2011 earthquake last month.
The MSCI Emerging Markets Index (MXEF) rose 3.6 percent, the biggest gain since September and trimming this quarter’s decline to 9.8 percent. Russia’s Micex Index climbed 3.3 percent. India’s Sensex and the Hang Seng China Enterprises Index (HSCEI) of Hong Kong-traded Chinese shares both jumped 2.6 percent. The yield on ruble-denominated government bonds due in 2018 fell 29 basis points to 8.02 percent after Russia’s Financial Markets Service said it will give foreign depositaries including Euroclear Bank SA direct access to domestic sovereign debt markets.
The euro surged 2.2 percent against the yen. Its gain versus the dollar left it 5.2 percent weaker since the end of March. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, tumbled 1.4 percent for its biggest drop since October. The Australian and New Zealand dollars jumped at least 1.6 percent against the greenback. The yen weakened against all 16 of its most traded peers.
Spain’s two-year yield sank 114 basis points to 4.27 percent and 10-year rates slid 61 basis points to 6.33 percent, with the extra yield investors demanding to hold the securities instead of benchmark bunds narrowing 68 basis points to 475 basis points. The yield on the equivalent maturity Italian security dropped 38 basis points to 5.82 percent.
Volatility on Irish government debt was the highest in developed markets today followed by Spain and Italy, according to measures of 10-year bonds, the spread between two-and 10-year securities and credit-default swaps. Irish bonds rose as Prime Minister Enda Kenny said the EU accord marked a seismic shift in policy that may ease the burden on the nation’s taxpayers.
Crude in New York led gains in the S&P GSCI index before an embargo on Iran starts. The EU agreed to ban the purchase, transportation, financing and insurance of Iranian oil starting July l. The sanctions are being imposed because western nations say Iran is hiding a nuclear weapons program. All 24 commodities tracked by the S&P GSCI advanced as lead, zinc, silver and copper rallied more than 4 percent.
The S&P GSCI dropped 13 percent in the second quarter and oil tumbled 18 percent, the biggest plunge for both since 2008.
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