BLBG:Euro, Stocks Gain as Court Allows ESM; Irish Bonds Climb
The euro strengthened to a four- month high and benchmark bunds fell as a German court allowed ratification of a bailout fund. Irish and Spanish bonds rallied and commodities advanced, while European stocks pared gains.
The euro appreciated 0.4 percent to $1.2902 at 8:20 a.m. in New York. The Stoxx Europe 600 Index added 0.2 percent, after climbing as much as 0.7 percent. Standard & Poor’s 500 Index futures jumped 0.4 percent. The 10-year German bund yield rose seven basis points to 1.62 percent, and the yield on similar- maturity Irish debt slid 17 basis points to 5.44 percent. Oil climbed 0.2 percent and gold advanced for a second day.
Germany’s Federal Constitutional Court cleared the way for ratification of the European Stability Mechanism, saying the country’s 190 billion-euro ($245 billion) contribution can’t be increased without legislative approval. The U.S. Federal Reserve begins a two-day meeting today amid speculation policy makers will provide more stimulus, and euro-area finance ministers are set to start meetings in Cyprus on Sept. 14.
The court decision is “one nagging issue that’s out of the way and means the focus is now going to be on the Eurogroup meeting,” said Ciaran O’Hagan, head of European rates strategy at Societe Generale SA in Paris. “It will mildly support risk.” The liability cap “will not prevent the ESM from going ahead which is critical,” he said.
Two shares advanced for every one that declined in the Stoxx 600. (SXXP) Banks and insurers gained, with Amsterdam-based ING Groep NV and France’s Credit Agricole SA climbing more than 3 percent. Barratt Developments Plc slid 6.3 percent as the U.K.’s largest homebuilder by volume said it won’t pay an annual dividend.
Facebook Climbs
The increase in S&P 500 futures indicated the U.S. equities gauge will extend yesterday’s 0.3 percent gain. Facebook Inc. (FB) climbed 3.4 percent in pre-market New York trading after the world’s biggest social network said it will focus on improving mobile advertising revenue.
The dollar weakened against 11 of its 16 major peers. The yield on 10-year Treasuries rose three basis points to 1.73 percent before the U.S. sells $21 billion of the notes today.
Spain’s 10-year bond yield fell 10 basis points to 5.60 percent, with the rate on its two-year security sliding 10 basis points to 2.83 percent. The yield on two-year Italian debt slipped 11 basis points to 2.20 percent, while 10-year yields lost four basis points to 5.04 percent.
The cost of insuring European high-yield corporate bonds using credit-default swaps fell to the lowest in more than a year. The Markit iTraxx Crossover index of credit-default swaps on 50 mostly junk-rated companies dropped 15 basis points to 488, the lowest since Aug. 3, 2011, on a closing basis. The gauge measures the cost of insuring the borrowers’ debt and its nine days of declines is the longest rally since June 2010.
Production Cuts
The S&P GSCI gauge of 24 commodities climbed as much as 0.8 percent to the highest since May 2. Oil jumped to $97.33 a barrel in New York and gold rose 0.5 percent to $1,741.88 an ounce. Soybeans, corn and wheat advanced before the U.S. Department of Agriculture’s monthly crops report at 8:30 a.m. in Washington.
The MSCI Emerging Markets Index (MXEF) advanced for a fifth day, adding 0.6 percent. The Hang Seng China Enterprises Index (HSCEI) of mainland companies climbed 1.2 percent after Premier Wen Jiabao said yesterday that China has “ample” room to use fiscal and monetary policy to meet economic targets. India’s Sensex increased 0.8 percent. South Korea’s Kospi index climbed 1.6 percent before a central bank decision on interest rates tomorrow. South Africa’s benchmark gauge jumped 1 percent.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
