U.S. stock index futures rose, European shares erased losses and Treasuries fell before a meeting of Federal Reserve policy makers. Gold rallied, oil pared declines and the Swiss franc strengthened. Standard & Poor’s 500 Index futures added 2.3 percent at 7:23 a.m. in New York, after losing as much as 3.2 percent. The Stoxx Europe 600 Index gained 0.4 percent, reversing declines of as much as 5.1 percent. Treasuries, the benchmarks for the $34 trillion U.S. debt market that is more than twice the value of American equities, fell with the 10-year note yield up eight basis points to 2.40 percent. The Italian 10-year yields slid 17 basis points. The franc appreciated against its 16 major peers. Oil sank 0.7 percent, while gold increased 2.4 percent. Fed policy makers will meet today after the unprecedented downgrade of the U.S.’s top credit rating shook investor confidence in America’s economic recovery. Speculation is growing that Chairman Ben S. Bernanke may announce new steps to pump up growth, after the S&P 500 tumbled 6.7 percent yesterday, the most since December 2008. Harvard University economist Kenneth Rogoff said the central bank will embark on a third round of asset purchases. “The recent stock market falls have highlighted that world growth is weakening, raising the prospect of a recessionary scenario, and governments need to do something about that type of scenario,” said Jason Teh, who helps manage about $3 billion at Investors Mutual Ltd. in Sydney. “The question is, when do you expect the government to provide some sort of intervention measure or stimulus?” Stock Rout The MSCI All-Country World Index fell for a 10th day, the longest losing streak since July 2008, as two stocks declined for every one that advanced. The gauge for developed and emerging markets fell as much as 2 percent today, extending declines from this year’s high in May to 20 percent, the threshold for a bear market. The selloff has sent benchmark indexes in 25 of the 45 countries in the global gauge into bear markets including China, the U.K., France, Germany, Spain, Italy Switzerland, Brazil, Russia and India. South Korea’s Financial Services Commission said it will prohibit the short-sale of all listed stocks until Nov. 9 starting tomorrow. Investors fled riskier assets yesterday on the first trading day after S&P cut U.S. debt to the second-highest level of AA+ from AAA. Instead of declining, Treasuries rallied, sending the 10-year yield down 16 basis points to 2.32 percent. Stocks vs Bonds While the stock rout wiped out about $2.5 trillion in global equity values, extending total losses since July 26 to $7.9 trillion, the Bank of America Merrill Lynch Global Broad Market Index of bonds has gained $132.4 billion since the end of July to a record $42.1 trillion. The S&P 500 sank 11 percent in the previous three days, trading at 12.3 times reported earnings, compared with its average of 16.4 since 1954, according to data compiled by Bloomberg. The MSCI All-Country World Index is valued at 12 times profits, down from 21 since 1995, the data show. “Fear has taken over,” said Paul Xiradis, who manages about $12 billion in assets as chief of Ausbil Dexia Ltd. in Sydney. “It’s like a rapid fire burning away the market. It appears to me we’re seeing all the classic signs of a blowout or a climax.” The yield on the 10-year Treasury note jumped as much as 12 basis points. It fell earlier to the lowest since January 2009. The U.S. sells $32 billion of three-year notes today, the first of three auctions this week totaling $72 billion. Fed Meeting Moody’s Investors Service reiterated yesterday that it affirmed the U.S. government’s top Aaa ranking because the dollar’s status as the main reserve currency allows it to support higher debt levels than other countries. Fitch Ratings affirmed its AAA grade for the U.S. last week. The U.S. AA+ rating at S&P is still higher than Japan or China. The Fed will move “more decisively” to secure the U.S. recovery, Rogoff told Bloomberg Television in an interview. Bernanke and his colleagues, who are scheduled to release a statement at about 2:15 p.m. New York time, may prolong a pledge to maintain record monetary stimulus, said economists at JPMorgan Chase & Co., BNP Paribas and Goldman Sachs Group Inc. Billionaire investor Wilbur Ross said he’s buying assets as the losses in global markets are being driven by fear rather than economic reality. “Has the world really gotten 10, 12, 15 percent worse in the last 48 hours? I don’t think so,” Ross, who leads WL Ross & Co., said in an interview with Bloomberg Television. “Buying stocks at today’s prices over a couple of years’ time period will prove to be a uniquely rewarding experience.” ECB Buying The yield on Italy’s 10-year note fell to 5.11 percent, after dropping 81 basis points yesterday. The extra yield investors demand to hold Italian 10-year securities instead of benchmark German bunds dropped 24 basis points to 279 basis points today, the least since July 26. The European Central Bank bought Italian and Spanish bonds for a second day, people familiar with the transactions said. Spain’s 10-year yield fell 15 basis points to 5.01 percent today, extending yesterday’s 90 basis points drop. Four years after BNP Paribas SA marked the start of a financial crisis by freezing withdrawals from investment funds because it wasn’t able to value subprime mortgage bonds, a reduction of the U.S. debt rating and escalating sovereign woes in Europe show credit markets are still fragile. Germany Riskier Germany is riskier than the U.K. for the first time since January 2008 as the euro-region crisis spreads, with the cost of insuring the country’s default rising to 83 basis points, while contracts protecting British debt climbed to 81 basis points, according to CMA. The Markit iTraxx Crossover Index of credit- default swaps on mostly junk-rated European companies increased for an eighth day, adding 29 basis points to 604.5, the highest level since June 2010, according to JPMorgan Chase & Co. The Swiss franc appreciated 1.3 percent against the euro, and strengthened 1.9 percent versus the dollar. The yen climbed 0.9 percent against the dollar, while the euro gained 0.7 percent versus the greenback. The pound declined 0.4 percent against the euro after a report showed U.K. manufacturing unexpectedly fell in June and the trade gap widened, adding to evidence that the economic recovery is faltering. The MSCI Emerging Markets Index dropped 3.4 percent, set to close in a bear market for the first time since the global financial crisis in 2009. The extra yield investors demand to own emerging-market debt over U.S. Treasuries increased two basis points, or 0.02 percentage point, to 358, the highest level since July 2010, according to JPMorgan Chase & Co.’s EMBI Global Index. Russia’s ruble led developing-nation currencies lower, weakening 3.4 percent against the dollar as oil fell. The S&P GSCI index of 24 commodities dropped 0.7 percent. Oil declined as much as $5.60, or 6.9 percent, to $75.71 a barrel, the lowest price since Sept. 29. Gold jumped as much as 3.5 percent to a record $1,780.10 an ounce. Silver fell 1.4 percent to $38.48 an ounce. To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; To contact the editor responsible for this story: Paul Sillitoe at psillitoe@bloomberg.net

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