BLBG:Euro Rises Most In Eight Months As Stocks, Oil Gain On EU
The euro strengthened, while U.S. equity futures, Asian stocks and commodities rose at least 1 percent on the last trading day of the first half after European leaders agreed to ease repayment rules for emergency loans to Spanish banks and relax conditions on potential help for Italy. The dollar sank and oil climbed.
The euro added 1 percent at 2:10 p.m. in Tokyo, heading for the biggest gain since June 6. Futures on the Standard & Poor’s 500 Index advanced 1 percent, and those on the FTSE 100 Index gained 1.7 percent. The MSCI Asia Pacific Index (MXAP) rose 1.8 percent as Asian bond risk fell. S&P’s GSCI index of 24 raw materials headed for its biggest gain in three weeks, as oil added 2.1 percent in New York and copper climbed 1.5 percent. The Dollar Index weakened 0.9 percent and Treasuries fell.
After 12 hours of talks ending at 4:30 a.m. in Brussels today, leaders of the 17 euro countries grew closer to solving the immediate crisis, dropping requirements that governments received preferred creditor status on crisis loans to Spain’s banks and allowing financial institutions to recapitalize without going through governments. French President Francois Hollande led a rebellion against Germany’s prescriptions with calls for instant relief for hard-hit nations.
“It was a moment of high drama,” said Jonathan Garner, Hong Kong-based chief strategist at Morgan Stanley. “France sided with Spain and Italy and all three of those countries made it very clear they weren’t pursuing with the long-term goals around fiscal union and or growth measures unless one dealt with the short-term problem of stability in the bond markets and the Spanish banks problem.”
Union Risks
The euro climbed to $1.2572. The Dollar Index, which measures the U.S. currency against six peers, fell to 82.046.
Euro-area leaders also discussed ways to reduce the risk premiums on Italian and Spanish bonds, which have driven concern by economists, investors and Europe’s global partners including the U.S. that the currency union risks coming apart. Spanish 10- year bond yields rose to 6.94 percent yesterday, while Italy’s 10-year yielded 6.19 percent. Ten-year yields of 7 percent forced Greece, Ireland and Portugal to seek bailouts.
The MSCI Asia Pacific Index has slumped 7.5 percent this quarter amid Europe’s worsening debt crisis and signs of a slowing global recovery. The gauge is 2.7 percent higher for the year after an 11 percent gain in the first quarter.
The Hang Seng Index (HSI) jumped 2.1 percent today and Australia’s S&P/ASX 200 Index advanced 1.3 percent. The Nikkei 225 Stock Average climbed 1.4 percent. Japan’s industrial output fell 3.1 percent in May, the most since the March 2011 earthquake and consumer prices declined, bolstering the case for extra stimulus to sustain the nation’s economic recovery.
Copper, Oil
Benchmark 10-year Treasury yields rose four basis points to 1.62 percent, according to Bloomberg Bond Trader data.
The Standard & Poor’s GSCI index of 24 commodities climbed 1.2 percent to 574.50, trimming the quarterly loss to 17 percent, the worst since the final three months of 2008. Copper rose to $7,495 a metric ton.
Oil increased to $79.28 a barrel before an embargo on Iran starts. The EU agreed to ban the purchase, transportation, financing and insurance of Iranian oil starting July l. Crude has lost 24 percent this quarter.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan declined 4 basis points to 177, Royal Bank of Scotland Group Plc prices show. The gauge is set to fall for a fourth day to the lowest level since June 21, according to data provider CMA.
To contact the reporter on this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
