Global stocks jumped the most in a month amid better-than-forecast U.S. earnings and industrial production, while the euro and Spanish bonds gained as two German lawmakers said the country is open to Spain seeking a precautionary credit line.
The MSCI All-Country World Index (MXEF) added 1.3 percent at 4 p.m. in New York as benchmark gauges in Spain and Italy surged at least 2.5 percent. The Standard & Poor’s 500 Index rallied 1 percent as Johnson & Johnson and Mattel Inc. advanced after reporting earnings, while Citigroup Inc. (C:US) climbed as Vikram Pandit stepped down as chief executive officer. The euro rose 0.8 percent to $1.3054, while the dollar weakened versus 11 of 16 major peers. Cocoa and copper led commodities higher.
European stocks extended gains and Spanish bonds reversed earlier losses as Michael Meister and Norbert Barthle, officials within Chancellor Angela Merkel’s Christian Democratic bloc, indicated a reversal to German resistance to a full bailout for Spain. Earnings topped estimates at 73 percent of the 48 companies in the S&P 500 that released results so far.
“Investors are cycling back into risk as earning as well as economic numbers in the U.S. are somewhat better than expected,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $138 billion in client assets, said in a telephone interview. “As long as Germany will lend its balance sheet to distressed countries like Spain, then that will embolden investor sentiment.”
European shares rose earlier as German investor confidence increased for a second month in October, sending credit-default swaps on the nation’s sovereign bonds down three basis points to 41, the lowest since July 2011.
Another report showed U.S. industrial production increased a more-than-forecast 0.4 percent in September, partially reversing the prior month’s slump and indicating manufacturers are regaining their footing. Growth in the U.S. economy will probably pick up to 3.5 percent next year, reducing the unemployment rate to near 7 percent, Federal Reserve Bank of St. Louis President James Bullard said late yesterday.
The S&P 500 climbed the most since Sept. 13 and extended yesterday’s 0.8 percent rally. Some 84 companies in the benchmark index of U.S. stocks are releasing results this week, according to data compiled by Bloomberg.
Mattel surged 3.3 percent after profit topped estimates amid gains in sales of Fisher-Price toys and American Girl dolls. Johnson & Johnson, the world’s biggest maker of health- care products, climbed 2.3 percent as earnings beat estimates on demand for new prescription drugs and medical tools acquired with the Synthes Inc. purchase.
Goldman Sachs Group Inc., the fifth-largest U.S. bank by asset, slipped 1 percent following yesterday’s 3.6 percent rally. The firm reported better-than-forecast profit as investments gained and revenue more than doubled on a rebound in fixed-income trading.
Citigroup climbed 1.6 percent as more than 126 million shares changed hands, the most since August 2011. The bank’s board concluded that Pandit had mismanaged operations, leading to setbacks with regulators and a loss of credibility with investors, a person with knowledge of the discussions said. Pandit told Bloomberg Television the decision to leave was his and was made with the board’s support.
U.S. Treasuries fell, sending the 10-year yield up six basis points to 1.72 percent.
Almost eight shares rose for each that fell in the Stoxx Europe 600 Index, which posted the first back-to-back advance since Sept. 12. Bellway Plc (BWY) climbed 3.2 percent to the highest price in almost five years after the U.K. homebuilder said annual profit increased 58 percent. Petropavlovsk Plc, a miner of gold in Russia, added 3.1 percent in London trading after reporting a gain in production.
In Germany, the ZEW Center for European Economic Research’s index of investor and analyst expectations rose to minus 11.5 this month from minus 18.2 in September, according to a Bloomberg survey of economists. Economists had forecast a reading of minus 14.9, according to the median of 36 estimates in a Bloomberg News survey.
“It does feel like there’s some momentum there in the economy,” said Matt Riordan, who helps manage about $6.5 billion in Sydney at Paradice Investment Management Pty. “We’ve got a reasonable rebound.”
The S&P GSCI Index of commodities trimmed an earlier 0.6 percent advance. Nickel and zinc lost at least 0.9 percent to lead declines among eight of 24 raw materials, while cocoa, copper and gold rose the most. Crude was little changed below $92 a barrel. Inventories in the U.S., the world’s biggest oil user, rose 1.5 million barrels last week, according to a Bloomberg News survey before a government report tomorrow.
The dollar fell the most against the currencies of South Africa and Denmark, losing at least 0.8 percent against each. Japan’s currency depreciated as much as 0.4 percent to 78.97 per dollar, its fourth straight decline, taking it to the weakest level since Sept. 19. It weakened 1 percent to 102.88 yen per euro.
Spain’s 10-year bonds rose, pushing the yield one basis points lower to 5.81 percent after driving it down nine points earlier. The nation sold 4.86 billion euros ($6.3 billion) of debt, exceeding its 4.5 billion-euro target. The Treasury auctioned 12-month bills at an average yield of 2.823 percent, compared with 2.835 percent at the previous auction on Sept. 18, and sold 18-month securities at 3.022 percent, compared with 3.072 percent last month.
Demand for the 12-month notes was 2.71 times the amount sold, up from 2.03 last month and the bid-to-cover for the longer-dated bills was 3.04 compared with 3.56 in September.
Spain is prepared to seek financial aid from the euro area and is waiting for a decision on how the request would affect Italy, the Financial Times reported, citing a senior official in Spain’s economy ministry it didn’t name.
For Spain, where Prime Minister Mariano Rajoy’s government has said it won’t request aid until the terms are clearer, a precautionary credit line “would be a possible move,” Barthle, the budget spokesman for Merkel’s party, said today in a text message. The 500 billion-euro ($650 billion) permanent rescue fund, the European Stability Mechanism, which came into force on Oct. 8, “envisages help for sectors in the economy with limited conditionality.”
German bunds fell, pushing the yield seven basis points higher to 1.54 percent.
The MSCI Emerging Markets Index rose 0.9 percent, the most in a month. South Korea’s Kospi advanced 0.8 percent and Taiwan stocks added 0.7 percent. Equity gauges in Turkey, Russia, South Africa, Hungary and the Czech Republic also gained.
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