BLBG: Stocks Gain as Europe Crisis Eases; Treasuries Fall, Gold Rises
By Rita Nazareth and David Merritt
May 12 (Bloomberg) -- Stocks rose, with the Standard & Poor’s 500 Index recovering losses from its May 6 plunge, as a successful Portuguese bond sale and planned budget cuts in Spain and the U.K. bolstered optimism the European debt crisis is subsiding. Treasuries fell and gold rose to a record.
The S&P 500 rallied 1.1 percent to 1,168.8 at 11:07 a.m. in New York, above its highest close since May 4. The Stoxx Europe 600 Index climbed 1.9 percent as all 19 of its industry groups gained. The 10-year Treasury yield increased 4 basis points to 3.56 percent, while gold surged to as high as $1,245.40 an ounce on speculation that international financial support for indebted European nations will depress currencies.
Portugal’s bond sale, Spain’s reduction in public wages and new U.K. Prime Minister David Cameron’s plans to cut the deficit added to optimism that Europe’s debt crisis will ease after leaders pledged almost $1 trillion in emergency loans over the weekend. Better-than-estimated earnings at companies from A.P. Moeller-Maersk A/S to ING Groep NV and faster-than-forecast growth in the euro region’s economy also lifted sentiment, as did a $15 billion leveraged buyout in the U.S.
“It’s not another Lewis Carroll’s ‘Alice in Wonderland’ tale,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “David Cameron’s budget-deficit plan reminds people that you have some adults in the world when it comes to addressing the problems. The European package was another adult response. The global economic recovery is continuing and will likely not be derailed by the European crisis.”
Global Advance
The MSCI World Index advanced 1.2 percent, recouping yesterday’s drop. Maersk, the owner of the world’s largest container-shipping line, rallied 9 percent after saying it returned to profit as freight rates jumped and global trade picked up. ING, the largest Dutch financial services company, jumped 5.1 percent in Amsterdam after reporting a better-than- estimated profit as bad loans fell. Deutsche Telekom AG, Europe’s biggest phone company, rose 3.8 in Frankfurt after earnings topped forecasts.
The U.K.’s FTSE 100 Index rose 1.2 percent as Conservative leader Cameron takes over as prime minister. The Bank of England said risks to the economic recovery have increased amid Europe’s sovereign debt crisis.
Morgan Stanley fell 3.7 percent after the Wall Street Journal reported that U.S. federal prosecutors are investigating some of the bank’s transactions in so-called collateralized debt obligations, citing people familiar with the matter. Chief Executive Officer James Gorman, speaking at a press conference in Tokyo today, said there is “no substance” to any allegations.
$15 Billion LBO
Blackstone Group LP rose 0.5 percent as the world’s biggest private equity company, Thomas H. Lee Partners LP and TPG Capital are in talks to pay more than $15 billion including debt for Fidelity National Information Services Inc.
The number of mortgage applications in the U.S. rose last week, led by a rebound in refinancing as long-term borrowing costs dropped below 5 percent for the first time in two months.
The trade deficit in the U.S. widened 2.5 percent in March to $40.4 billion, the highest level in more than a year, as the cost of imported oil climbed and companies restocked shelves with goods bought abroad. The gap was in line with the median forecast of economists surveyed by Bloomberg News and the most since December 2008, Commerce Department figures showed.
The MSCI Asia Pacific slipped 0.1 percent. Mitsubishi UFJ Financial Group Inc., which holds about 20 percent of Morgan Stanley, sank 2.4 percent in Tokyo. China Resources Land Ltd., a property developer, lost 3.1 percent in Hong Kong. Posco, South Korea’s largest steelmaker, declined 2.5 percent.
The yen weakened against 14 of its 16 most-traded counterparts, dropping 0.5 percent against the dollar, amid demand for high-yielding currencies.
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; David Merritt in London on dmerritt1@bloomberg.net
