The euro surged the most in six months and stocks rallied as European officials detailed a plan to halt the region’s debt crisis. Treasuries fell and the Dollar Index slid the most since December. The euro strengthened 1.5 percent to $1.4425 as of 5 p.m. in New York and climbed 2.2 percent in three days. The Standard & Poor’s 500 Index rose 1.4 percent to 1,343.8 as of the market close in New York. Italian, Spanish and Greek bonds surged and costs to protect the region’s debt from default slid the most since May 2010. Oil traded above $100 a barrel for the first time in more than a month. The Dollar Index lost 1.1 percent. The euro and equities strengthened as European officials said Greece will receive aid worth 160 billion euros ($230 billion) and empowered their bailout fund to buy the debt of stressed nations and offer emergency credit lines. Better-than- estimated quarterly results from Morgan Stanley (MS) and other companies also boosted U.S. stocks. “It’s a sigh of relief,” Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said in a telephone interview. The firm manages $3.3 billion.“Progress on Europe’s debt situation is allowing the market to remain at these levels. It’s the framework for a package and the markets have reacted positively.” Earnings Season U.S. equities erased yesterday’s 0.1 percent drop in the S&P 500, sending the index to its highest level since July 8. The Dow Jones Industrial Average climbed 152.5 points, or 1.2 percent, to 12,724.41, its highest close since May 10. Stocks rallied to their highs of the session after the New York Times reported that lawmakers were close to a deal to cut the U.S. deficit, helping the government of the world’s largest economy avoid default. Spokesmen for President Barack Obama and House Speaker John Boehner denied the report. Morgan Stanley, the world’s largest brokerage, jumped 11 percent for its biggest gain in two years after reporting a second-quarter loss that was smaller than analysts estimated as trading revenue increased from the first quarter. Medco Health Solutions Inc. (MHS) surged 14 percent after Express Scripts Inc. (ESRX) agreed to buy the pharmacy-benefits manager for $29.1 billion. Per-share earnings have grown 17 percent and exceeded analyst estimates at 86 of the 100 companies in the S&P 500 that posted results since July 11, data compiled by Bloomberg show. Economic Data U.S. equity index futures maintained gains before the start of trading even as more people than forecast filed claims for unemployment benefits last week. Applications for jobless benefits increased 10,000 last week to 418,000, Labor Department figures showed. Economists forecast 410,000 claims, according to the median estimate in a Bloomberg News survey. Stocks extended their advance in the first hour of trading after the Conference Board’s index of leading economic indicators and a Federal Reserve gauge of manufacturing in the Philadelphia region both topped economists’ estimates. The yield on the 10-year Treasury note increased eight basis points to 3.004 percent, rising above 3 percent for the first time in two weeks. Two-year yields added two basis points to 0.40 percent. S&P reiterated it sees a 50 percent chance of downgrading the U.S. credit rating within three months as the federal debt ceiling loomed. The Treasury auctioned $13 billion of 10-year inflation-protected securities today and will sell $99 billion in notes next week. ‘No Deal’ President Barack Obama’s spokesman, Jay Carney, and House Speaker John Boehner said there is “no deal” on raising the U.S. debt limit as all sides said they still lack a consensus on spending cuts and tax revenue. Carney made his remarks at a briefing in Washington and Boehner posted his in a Twitter message. Senators seeking a compromise haven’t produced details sought by leaders, making it harder to add their proposals to a plan to raise the $14.3 trillion debt ceiling, said two Democratic aides familiar with the discussions. A bipartisan group of senators called the “Gang of Six” outlined a $3.7 trillion deficit-reduction plan and Obama embraced it this week. Boehner told reporters he prepared his membership for a possible compromise with Democrats and he believed a majority of the 240 Republicans are prepared to do so. The euro increased versus 13 of 16 major peers after depreciating against all of them earlier. The dollar weakened against 15 of 16 counterparts and the Dollar Index, a gauge of the U.S. currency against six major peers, fell 1.1 percent to 73.963 in its biggest drop since Dec. 3. European Stocks European stocks erased earlier losses, with banks leading gains as details of the European debt summit trickled out during the trading session. National Bank of Greece SA surged 11 percent to lead Greek lenders higher. Swedbank AB advanced 6.2 percent after the largest lender in the Baltic region posted profit that beat analysts’ estimates. Ericsson AB, the world’s largest maker of wireless networks, tumbled 9.7 percent as earnings fell short of analysts’ estimates. The yield on the Spanish 10-year bond decreased 25 basis points to 5.69 percent. The government sold 2.6 billion euros ($3.7 billion) of securities. Similar-maturity Italian debt yields fell 25 basis points to 5.32 percent and Greek 10-year yields tumbled 86 points to 16.49 percent. Credit-default swaps protecting Spanish debt decreased 36 basis points to 308 as of the market close in London, Irish swaps lost 172.7 basis points to 904.155 and contracts on Greece fell 348 points to 2,000, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments fell 21 basis points to 260, the biggest retreat since May 10, 2010. The index is down from a record 306 points on July 18. Brussels Summit Euro-area leaders redoubled efforts to end the 21-month sovereign bond crisis as they risked a temporary default to ease Greece’s debt burden and erected a firewall around Spain and Italy. The wider scope for the 440-billion euro European Financial Stability Facility resulted from concessions from Germany and the European Central Bank. Today’s summit in Brussels was the latest in a battle to resolve and contain the crisis amid calls this week for tougher action from Obama and the International Monetary Fund. Two European officials familiar with the talks say governments may guarantee any defaulted Greek debt offered as collateral at money market operations. That would enable Greek banks to keep tapping the ECB for emergency funds. The officials said the aim would be limit any credit event to a few days. Wheat Slumps, Sugar Rallies Wheat lost 2.8 percent, leading losses in the S&P GSCI Index, on signs that demand is easing for U.S. supplies as competing producers boost output and lower prices. Sugar rallied 3.2 percent 29.85 cents a pound, leading gains among commodities tracked by the index, on signs that production will trail estimates in Brazil. Oil for September delivery advanced 0.7 percent to $99.13 a barrel in New York, a third straight gain, and traded above $100 for the first time since June 15. Gold futures decreased 0.6 percent to $1,587 an ounce, erasing earlier gains. The metal reached a record of $1,610.70 on July 19. The MSCI Emerging Markets Index advanced 0.6 percent for a third straight gain as benchmark indexes in Hungary and Brazil rallied more than 1.9 percent. The Shanghai Composite Index sank 1 percent after the HSBC Purchasing Managers’ Index slumped below 50 for the first time in a year, denoting a contraction in the nation’s industrial output. Turkey’s ISE National 100 Index slid 1.2 percent after Fitch Ratings said the current-account deficit made an upgrade of the country’s credit “uncertain.” To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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