European stocks and commodities rose for the first time in four days amid speculation policy makers are examining measures to shield banks from the sovereign-debt crisis. Standard & Poor’s 500 Index futures rose 0.8 percent after the U.S. stocks gauge rallied late yesterday.
The Stoxx Europe 600 Index jumped more than 2 percent as of 11:50 a.m. in London. The yield on the 10-year Italian note advanced five basis points after Moody's Investors Service cut Italy's rating. Treasuries fell for a second day. The S&P GSCI Index of 24 raw materials climbed 1.7 percent.
European Union finance ministers are discussing ways of coordinating recapitalizations of banks, the Financial Times reported, while France and Belgium said a “bad bank” will be set up to hold Dexia SA (DEXB)’s troubled assets. Moody’s cut Italy’s grade for the first time in almost two decades. Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank can take further steps to sustain a recovery that’s “close to faltering.”
“My gut feel is that the European situation still might need to get worse to provoke the type of response the market really wants but such a day is no doubt getting closer,” Jim Reid, head of fundamental strategy at Deutsche Bank AG in London, wrote in a note to investors.
Dexia’s Assets
The Stoxx 600 rebounded from a three-day, 5 percent drop. Dexia gained 5.8 percent after plunging 22 percent yesterday. France and Belgium, which bailed out Dexia in 2008, will take “all necessary measures” to protect clients and will guarantee all of Dexia’s loans, finance ministers from the two countries said yesterday. BHP Billiton Ltd. and Rio Tinto Group, the world’s largest mining companies, climbed more than 3 percent.
EU ministers have a “sense of urgency” and a “shared view” of the need for a “concerted, coordinated approach in Europe,” EU Commissioner for Economic Affairs Olli Rehn said, according to the FT. “Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty,” the newspaper quoted him as saying.
The yield on the German 10-year bond rose seven basis points. Similar-maturity Italian yields increased even as the European Central Bank bought the nation’s debt, along with Spain’s, according to at least three people with knowledge of the transactions. Germany sold 4.03 billion euros of two-year notes, while Portugal auctioned as much as 750 million euros of 105-day bills.
Bernanke Testimony
The S&P 500 closed 2.3 percent higher yesterday following the FT report. It was the 10th time since 1985 that the index posted a loss of 1 percent or more at 3 p.m. and was up when the market closed, according to data compiled by Bespoke Investment Group LLC in Harrison, New York. The measure declined the next day eight times, with losses averaging 1.3 percent, the data show.
In testimony to Congress’s Joint Economic Committee in Washington, Bernanke cautioned lawmakers against making changes in fiscal policy that harm growth. The Fed can give more information about its pledge to keep interest rates low at least through mid-2013, reduce the rate paid on banks’ reserve deposits or buy more securities, he said. Treasury 10-year yields rose three basis points to 1.86 percent.
Italy Downgrade
Moody’s cut Italy’s rating three levels to A2 from Aa2, with a negative outlook, and said other European countries rated below the top Aaa level may face downgrades. S&P lowered Italy’s grade on Sept. 20 for the first time in five years.
Signs that the region’s debt crisis is hampering growth have prompted speculation the ECB will lower borrowing costs at a policy meeting tomorrow. Eleven of 52 economists surveyed by Bloomberg said it will cut its benchmark interest rate by at least a quarter-percentage point from the current 1.5 percent. The others expect no change.
S&P’S GSCI Index of raw materials gained after a three-day, 5.1 percent slump dragged the gauge down to its lowest level since Nov. 30. Oil in New York jumped 2.8 percent to $77.76 a barrel, copper climbed 1.7 percent to $6,915 a metric ton after falling 10 percent in the past five days. Corn gained 1.3 percent after falling 7.1 percent in the past three days.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.2 percent. The pound was 0.1 percent lower after a report showed U.K. economic growth slowed by more than initially estimated in the second quarter. The yen strengthened against all but four of its 16 most-traded peers monitored by Bloomberg.
Asia Pacific
The MSCI Asia Pacific Index fell 0.2 percent, extending a three-day, 5.7 percent slump. Japan’s Nikkei 225 Stock Average retreated 0.9 percent, paced by a 4 percent drop in Fast Retailing Co., after Asia’s biggest apparel chain said same- store sales at its Uniqlo casual clothing stores in Japan fell 10.7 percent in September from a year earlier.
The MSCI Emerging Markets Index rose 0.1 percent percent. The BUX Index jumped 4 percent in Budapest, led by Gedeon Richter Nyrt. after Hungary’s biggest drugmaker reported positive results from a clinical trial. The ISE National 100 Index jumped 1.3 percent in Istanbul after the central bank cut reserve requirements on foreign-currency deposits. Benchmark indexes gained 1.9 percent in Poland and 1.8 percent in the Czech Republic.
To contact the reporters on this story: Michael Shanahan in London at Mshanahan3@bloomberg.net Shiyin Chen in Singapore at schen37@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
