BLBG: U.S. Futures Rally on China Comments; Euro Strengthens
By David Merritt
May 27 (Bloomberg) -- Stocks and U.S. futures surged and the euro snapped a three-day decline against the dollar as China said it remains a long-term investor in Europe, damping concerns that the region’s debt crisis will worsen. Commodities rallied.
The MSCI World Index, a gauge of equities in 24 developed nations, climbed 0.9 percent at 8:15 a.m. in New York. Futures on the Standard & Poor’s 500 Index jumped 2.2 percent. The euro strengthened 0.7 percent against the dollar, snapping a three- day slump that took it to near a four-year low, and appreciated 1.3 percent compared with the yen. Oil and copper advanced for a second day.
More than ten shares gained for each that fell on the benchmark Stoxx Europe 600 Index. China’s foreign exchange regulator said reports that it was reviewing its euro holdings are “groundless,” boosting sentiment in the wake of a debt crisis that wiped about $6 trillion from the value of equities this month. A report today may show the number of Americans filing for jobless claims fell last week, adding to evidence that the U.S. economy is gathering strength.
“The news out of China is providing some relief, while better data out of the U.S. is stoking some cautious optimism in markets,” said Melinda Burgess, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in London.
BHP, BP Rally
The Stoxx 600 gained 2 percent, extending yesterday’s 2.4 percent surge, while the MSCI Asia Pacific Index jumped 1.9 percent. Man Group Plc, the biggest publicly traded hedge fund firm, soared 6.1 percent in London after reporting earnings that topped analyst estimates. BHP Billiton Plc rose 4.3 percent and Rio Tinto Plc advanced 3.5 percent after the Australian newspaper said the Pacific nation may change the rate at which a proposed mining profit tax takes effect. BP Plc gained 3.3 percent as the oil company attempts to plug the Gulf of Mexico spill that cut the stock’s price by a quarter.
The rally in U.S. futures indicated the S&P 500 may erase yesterday’s 0.6 percent decline. The benchmark index fell in the final hour yesterday as a report that China may review investments in European government bonds spurred concern the debt crisis will worsen.
China’s sovereign wealth fund denied reports that it’s reviewing holdings of euro assets and said it’s maintaining its European investments.
“Europe has been, and will be one of the major markets for investing China’s exchange reserves,” the State Administration of Foreign Exchange said in a statement on its website today. The official Xinhua News Agency reported China Investment Corp. President Gao Xiqing said yesterday Europe’s turmoil “hasn’t had too big of an impact” on CIC’s investment decisions.
U.S. stock markets are oversold and may rally strongly in the next few days, said investor Barton Biggs, who runs New York-based hedge fund Traxis Partners LP.
“I think they’re going to stabilize in this general area, and then we’re going to have a significant move to the upside,” Biggs, whose flagship fund returned three times the industry average last year, said in a Bloomberg Television interview.
A Labor Department report set for 8:30 a.m. in Washington may show the number of Americans filing for jobless claims fell last week to 455,000 from 471,000, according to the average economist estimate in a Bloomberg survey.
Emerging Markets
The MSCI Emerging Markets Index advanced 1.5 percent, extending yesterday’s 3.2 percent rally and heading for its biggest back-to-back gain since July 2009. Benchmark indexes in China, South Korea and Hungary rose more than 1 percent today.
Templeton Asset Management Ltd.’s Mark Mobius said he’s been buying stocks in Brazil, Russia, India and China in the past month and the slump in emerging markets is a “correction” in a bull market.
“Despite the fact that a lot of people think that we are entering into a bear market, we don’t believe so,” Mobius, who oversees about $34 billion in emerging markets as Templeton’s Singapore-based executive chairman, said in an interview yesterday in Cairo. “When the time comes, emerging markets will recover faster and in a big way.”
South Korean Won
The yen and the dollar declined as the gains in stocks damped demand for the currencies as a haven, encouraging traders to buy higher-yielding assets. The Japanese currency slid against all 16 of its most-traded counterparts while the dollar declined versus all but the yen. The South Korean won appreciated for the first time in three days after the central bank forecast a $2.5 billion current-account surplus for May.
Crude oil for July delivery advanced 2.3 percent to $73.16 a barrel in New York trading. Copper for delivery in three months jumped 1.8 percent to $6,901 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also gained. Palladium for immediate delivery added 3 percent to $452.08 an ounce, advancing for the first time in three days.
Treasuries fell for a second day as the government prepared to sell $31 billion of seven-year notes today. The 10-year yield jumped 9 basis points to 3.28 percent. The German 10-year bund yield rose two basis points to 2.67 percent before a report economists say will show inflation accelerated this month, fueling concern governments will struggle to entice buyers amid record-low yields and improving economic data.
The cost of insuring against losses on European corporate bonds fell, with the Markit iTraxx Crossover Index of credit- default swaps on 50 mostly high-yield companies dropping 25.4 basis points to 575.33, according to Markit Group Ltd. That’s still near the highest level in 10 months.
To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net
