Stocks rose, extending the first weekly gain since July for the Standard & Poor’s 500 Index, amid optimism the world’s biggest economy will continue to expand and after Hurricane Irene failed to shut financial markets. Treasuries retreated, while Greek stocks soared.
The MSCI All-Country World Index added 1.9 percent at 10:06 a.m. in New York and the S&P 500 gained 1.6 percent. The Stoxx Europe 600 Index advanced 1.4 percent as Greek stocks headed for their biggest climb in twenty years. Treasuries snapped a two- day rally, pushing up the yield on 10-year notes by eight basis points. The Swiss franc weakened against its 16 major counterparts. Soybean futures climbed to a six-month high.
U.S. markets opened as usual, with the estimated cost to insurers of Hurricane Irene dropping to about $2.6 billion from as high as $14 billion last week, according to Kinetic Analysis Corp., a firm that predicts disaster effects. Data today showed U.S. personal spending rebounded in July as autos sold at the fastest pace in three months. Federal Reserve Chairman Ben S. Bernanke said on Aug. 26 in Jackson Hole, Wyoming, that the U.S. economy isn’t deteriorating enough to warrant any immediate additional stimulus.
“Some positive thinking here has some value to at least making investors think twice before they dump stocks,” Madelynn Matlock, who helps oversee $14.8 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “Central bankers don’t think there’s any really immediate screaming problem to deal with and have taken that more positively. Plus, there’s the fact that valuation is a whole lot better than it was a couple of months ago. In addition, the absence of any bad news in Europe is good news.”
‘Fuller Discussion’
S&P 500 index (SPX) extended its Aug. 26 rally of 1.5 percent. The index increased 4.7 percent last week, its first gain in more than a month, after Bernanke said a second day has been added to the next Federal Open Market Committee meeting in September to “allow a fuller discussion” of the economy and possible policy responses.
“It’s very clear that he’s not going to preside over a severe economic downturn if he can help it,” Mark Mobius, who oversees about $50 billion as executive chairman at Templeton Asset Management, said in an interview. “We’re not going to see a recession. He’s still got policy tools available.”
Consumer Spending
Stocks maintained their gains after consumer spending climbed more than forecast in July as Americans dipped into savings to buy cars and cool their homes, showing the biggest part of the economy is holding up. Purchases rose 0.8 percent, the biggest gain since February, after a 0.1 percent decline the prior month, Commerce Department figures showed today in Washington.
In a separate report, the number of contracts to purchase previously owned U.S. homes fell 1.3 percent in July, the first decline in three months, the National Association of Realtors said today in Washington.
The Stoxx Europe 600 Index halted two days of losses, with just 11 stocks declining. Munich Re and Swiss Re Ltd., the world’s biggest reinsurers, both gained more than 3.5 percent. U.K. financial markets are closed for a holiday.
Greece’s ASE Index surged 15 percent after Alpha Bank SA said it will buy EFG Eurobank Ergasias SA to create the nation’s biggest lender. Both banks, along with their peers National Bank of Greece SA and Piraeus Bank SA, jumped more than 28 percent. The Cyprus General Market Index climbed by a record 18.6 percent.
Emerging Markets
The MSCI Emerging Markets Index gained 2.6 percent, the biggest gain in more than a year. Benchmark indexes in South Korea and India jumped at least 2.8 percent and Russia’s Micex Index rose 3.2 percent. The Shanghai Composite Index dropped 1.4 percent on concern China is further tightening monetary policy. The MSCI Asia Pacific Index rallied 1.5 percent, after declines pushed valuations for the regional index down to as low as 11.8 times estimated earnings last week, the cheapest since November 2008.
“Markets that had been very oversold on the idea that the global economy is sinking into another recession will get some relief,” Arnout Van Rijn, chief investment officer for Asia at Robeco Hong Kong Ltd., said in a Bloomberg Television interview.
Treasuries fell for the first time in three days, sending 10-year note yields up eight basis points to 2.28 percent. The German bond yield was eight basis point higher at 2.23 percent, compared with the Aug. 18 record low of 2.03 percent.
European Debt
Italian bonds declined before auctions later this week, pushing 10-year yields two basis points higher to 5.09 percent. The yield on similar-maturity Spanish debt also added two basis points, to 5.02 percent. Italy seeks to raise as much as 8 billion euros from selling a new 10-year benchmark bond tomorrow, as well as debt maturing in 2014 and 2018.
High-yielding currencies gained, with the South African rand outperforming all of its 16 major peers and adding 1.4 percent against the dollar to the strongest in three weeks. New Zealand’s currency rallied 0.6 percent. The Swiss franc weakened 1.4 percent against the dollar on speculation regulators will impose measures making it more expensive to hold the currency. The Swiss government said it discussed the currency today, and may make an announcement on Sept. 1.
The S&P GSCI Index of 24 commodities rose to a three-week high, led by gains in crude oil, cocoa and coffee. The index advanced 1 percent to 644.50, after touching 665.54, the highest since Aug. 3.
Gold futures retreated in New York. December-delivery bullion slipped 0.7 percent, after gaining 2.5 percent earlier.
Hurricane Irene
Gasoline fell for a second day, losing as much as 2 percent and trimming a 4.7 percent gain in the three days through Aug. 25 that was stoked by concern Irene would put U.S. East coast refineries offline. Brent crude rose 1 percent, while West Texas Intermediate oil jumped 2.2 percent.
Soybeans for November delivery rose as much as 1.2 percent to $14.41 a bushel, the highest price for a most-active contract on the Chicago Board of Trade since Feb. 11. December-delivery corn gained as much as 1.6 percent to reach the highest level for a most-active contract in Chicago since June 9.
U.S. farmers may harvest 12.484 billion bushels of corn this year, the Professional Farmers of America newsletter said Aug. 26 after completing a four-day tour of Midwest fields. The estimate was 3.3 percent below the U.S. Department of Agriculture’s forecast. Iowa and Illinois, the biggest growers of corn and soybeans, had the hottest July since 1955, and rainfall has been below normal this month.
To contact the reporters on this story: Mark Gilbert in London at magilbert@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
