BLBG: Stocks, Euro, Oil Rebound on Economy Outlook; Treasuries Gain
European stocks, U.S. futures and the euro pared losses and oil rose on speculation that the global recession will end this year, even after earnings at Intel Corp. fell and UBS AG Chief Executive Officer Oswald Gruebel said markets remain “extremely unstable.”
Europe’s Dow Jones Stoxx 600 Index was little changed after dropping as much as 1.2 percent, and Standard & Poor’s 500 Index futures rose 0.4 percent at 7:06 a.m. in New York. The euro was little changed at $1.3263 and 131.72 yen. Oil climbed 1.9 percent to $50.34 a barrel in New York.
“It’s too early to be bullish because of the data we’re seeing on the global economy, but investing is an issue of price and earnings,” said Christopher Palmer, who helps manage about $4 billion as the London-based head of global emerging markets at Gartmore Investment Management Ltd. “Prices for many asset classes appear to be too low. Investors are willing to take some risk that those earnings will recover in the fullness of time.”
The U.S. government will probably report that industrial production fell 0.9 percent in March, according to the median forecast in a Bloomberg survey of 76 economists. America’s gross domestic product shrank 5 percent in the first quarter. It will expand 1.6 percent in the fourth quarter, according to another Bloomberg survey.
Treasuries gained, with the yield on the benchmark 30-year bond dropping four basis points to 3.62 percent, the lowest level since April 2, based on closing prices. U.S. consumer prices probably fell 0.1 percent in March from a year earlier, according to a Bloomberg survey. The Labor Department will publish the data at 8:30 a.m. in Washington.
GlaxoSmithKline Rallies
Health-care companies and household goods makers led the advance in European stocks. Brentford, England-based GlaxoSmithKline Plc, the world’s second-biggest drugmaker, climbed for the first time in seven days, adding 2 percent to 1,028.5 pence.
Oil shares rose with the price of crude. The gains offset declines by Intel and UBS. Futures on the Standard & Poor’s 500 Index fluctuated between gains and losses.
“Clearly markets are discounting a lot of bad news coming out of the corporate earnings season,” Bob Parker, who helps oversee $600 billion as vice chairman of Credit Suisse Asset Management, said in a Bloomberg Television interview in London. “It’s far too early to say that it’s the bottom of the recession,” he said. “If we do get poor earnings” that will put a ceiling on gains, he said.
Intel slipped 4.3 percent to $15.32 in German trading. The Santa Clara, California-based chipmaker posted a 55 percent drop in first-quarter profit to $647 million. Chief Executive Officer Paul Otellini said Intel still faces a “fragile global economic environment” and isn’t ready to predict growth this quarter.
‘Long Road Back’
Zurich-based UBS fell 2.9 percent to 12.88 Swiss francs after earlier declining 9.4 percent. Switzerland’s biggest bank reported a loss of almost 2 billion francs ($1.75 billion) for the first quarter.
“It will be a long road back to success,” Gruebel said in a speech prepared for delivery at UBS’s annual shareholders’ meeting in Zurich. “Markets remain extremely unstable.” The bank will cut an additional 7,500 jobs, it said today.
Analysts estimate that profits at S&P 500 companies decreased for the seventh straight quarter in the January-March period, the longest stretch of declines since at least the Great Depression.
The cost of protecting corporate bonds sold by European banks from default rose in the credit-default swaps market. Contracts tied to the debt of Bank of Ireland widened 24 basis points to 462.5, according to CMA DataVision prices. Deutsche Bank AG climbed 7 basis points to 125, while contracts on UBS’s subordinated bonds rose 9 to 244.
Credit-default swaps conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point on a contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year.
