BLBG:European Stocks, Euro Gain As Spain Bond Yields Decline
European stocks rose for a third day and the euro rebounded as Spanish bond yields declined after the government met its target at a bill auction and as the Federal Reserve prepared to meet to consider stimulus measures.
The Stoxx Europe 600 Index (SXXP) added 0.6 percent at 7:25 a.m. in New York. Standard & Poor’s 500 Index (SPX) futures climbed 0.2 percent, reversing a 0.3 percent drop. The euro strengthened 0.4 percent to $1.2622. The yield on Spain’s two-year note dropped nine basis points and the cost of insuring the country’s debt fell from an all-time high.
Spain sold 3.04 billion euros ($3.8 billion) of bills, compared with a target of 3 billion euros. Fed policy makers will begin a two-day meeting today as Group of 20 leaders focus their response to Europe’s financial crisis at a summit in Mexico. Stocks and the euro pared gains earlier after Greek leaders said they would seek to renegotiate the terms of an international bailout.
“The best thing about today’s bill auction is that they’ve sold the target volume,” said John Davies, a fixed-income strategist at WestLB AG in London. “While there might be some knee-jerk relief that they’ve managed to sell the paper I doubt that will extend too far.”
Three shares advanced for every one that declined in the Stoxx 600, putting the gauge on course for the highest close in a month. Home Retail Group Plc surged 26 percent as first- quarter sales at the Argos chain beat estimates. Danone tumbled 7.6 percent after the world’s biggest yogurt maker cut its profitability forecast.
Housing Starts
The S&P 500 has climbed for three straight days, reaching the highest level since May 11. A U.S. report today may show housing starts rose 0.6 percent last month to a 722,000 annual pace, the highest since October 2008, according to the median estimate of 76 economists surveyed by Bloomberg.
Oracle Corp., the world’s largest maker of database software, rose 3.6 percent in pre-market trading after fiscal fourth-quarter profit topped analysts’ estimates, buoyed by sales of new software licenses.
The yield on the 10-year Spanish bond fell eight basis points to 7.08 percent, after climbing to a euro-era record 7.29 percent yesterday. The government sold 2.4 billion euros of 12- month bills at an average rate of 5.074 percent, up from 2.985 percent paid on May 14. It also sold 639.3 million euros of 18- month debt at 5.107 percent, compared with 3.302 percent last month, the Madrid-based Bank of Spain said today.
ECB Move
“There is a building expectation” that the European Central Bank will step in, Don Smith, a London-based economist at ICAP Plc, the biggest interdealer broker, said in a radio interview today on “Bloomberg The First Word” with Ken Prewitt. “Yield levels now are so high for Spain and, in particular, spreads against Germany and other AAA euro-zone countries have moved so wide, there is an expectation an ECB move will be imminent.”
The yield premium investors demand to own Spanish debt over benchmark German bunds narrowed 12 basis points to 562 basis points. Credit-default swaps on Spain fell nine basis points to 614.5. The contracts reached an all-time high of 633 basis points yesterday.
The Italian 10-year bond yield fell 11 basis points, while the equivalent-maturity Greek yield declined nine basis points.
Denmark sold 1.55 billion kroner ($262 million) of a 2 percent note due 2014 to yield minus 0.08 percent today, according to the central bank, the first time it has auctioned the debt at a negative yield.
The euro gained against 12 of its 16 major counterparts, strengthening 0.1 percent versus the yen. The Dollar Index dropped 0.3 percent.
The MSCI Emerging Markets Index climbed 0.2 percent, gaining for a third day. India’s Sensex gauge advanced 0.9 percent and Russia’s Micex Index added 0.3 percent. Egypt’s EGX 30 Index tumbled 4.6 percent as a power struggle between civilian politicians and the ruling generals threatened to derail the country’s transition to democracy.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net;
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net
