BLBG:Stock, Euro Rise As EU Relief Plan Spurs Spain Bond Rally
Stocks rose, the euro strengthened the most this year and Spanish bonds rallied after European leaders reached an agreement that alleviated concern banks will fail. Commodities jumped as the dollar sank.
The MSCI All-Country World Index (MXWD) climbed 1.1 percent at 10:10 a.m. in London and the Stoxx Europe 600 Index advanced 1.5 percent. Standard & Poor’s 500 Index futures increased 1.3 percent. The euro appreciated 1.1 percent after rising by the most since Nov. 30. Spain’s two-year yield plunged the most since Aug. 8, with the German 10-year bund yield jumping to the highest in more than eight weeks. The S&P GSCI gauge of 24 raw materials rose the most in three weeks.
After talks ended at 4:30 a.m. in Brussels today, leaders of the 17 euro countries dropped requirements that taxpayers get preferred creditor status on aid to Spain’s banks and opened the way to recapitalize lenders directly without bailout funds. More than $4.9 trillion has been erased from global equity values this quarter amid concern that a worsening debt crisis will stifle the global recovery.
“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.”
The Stoxx 600 (SXXP)’s advance extended this month’s rally to 3.6 percent. The gauge has still retreated 5.7 percent this quarter. Italy’s UniCredit SpA, Spain’s Banco Bilbao Vizcaya Argentaria SA and France’s BNP Paribas SA climbed more than 5 percent today as a gauge of banks in the Stoxx 600 increased the most in more than two weeks.
Japan Output
The MSCI Asia Pacific Index climbed 2 percent, reversing a 0.4 percent drop after the agreement was announced. Stocks fell earlier as a report showed Japan’s factory output dropped the most since the March 2011 earthquake last month.
The gain in U.S. index futures indicated the S&P 500 will pare this quarter’s retreat to 5.6 percent. Research In Motion Ltd. plunged 14 percent in German trading today after posting a loss and delaying the next BlackBerry operating system.
A report today may show U.S. consumer spending stalled in May as slowing job growth and subdued wage gains. Household purchases, which account for about 70 percent of the economy, were unchanged after a 0.3 percent gain in April, according to the median estimate of 75 economists surveyed by Bloomberg.
Other data are forecast to show that business activity in the U.S. expanded at a slower pace in June and consumer sentiment dropped to a six-month low.
Emerging Markets
The MSCI Emerging Markets Index (MXEF) rose 2.1 percent, the biggest gain since Jan. 17 and trimming this quarter’s decline to 11 percent. The Hang Seng China Enterprises Index (HSCEI) of Hong Kong-traded Chinese shares jumped 2.6 percent and benchmark indexes in Russia, Hungary and India gained at least 2 percent. The yield on ruble-denominated government bonds due in 2018 fell 10 basis points to 8.23 percent, the biggest drop since June 15, after Russia’s Financial Markets Service said it will give foreign depositaries including Euroclear Bank SA direct access to domestic sovereign debt markets.
The euro surged as much as 1.7 percent against the yen to 100.52. Its gain versus the dollar left it 5.9 percent weaker since the end of March, on course for its worst quarterly performance since September. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, tumbled 0.8 percent. The Australian and New Zealand dollars both jumped 1.2 percent against the greenback. The yen weakened against all 16 of its most traded peers.
Spanish Bonds
The Spanish 10-year yield slid 39 basis points to 6.55 percent, with the extra yield investors demanding to hold the securities instead of benchmark bunds narrowing 51 basis points to 492 basis points. The yield on the equivalent maturity Italian security dropped 27 basis points to 5.92 percent.
The yield on the 10-year U.S. Treasury note advanced five basis points to 1.63 percent, leaving the rate 25 basis points lower this year.
Crude in New York led gains in the GSCI index, rising 2.6 percent to $79.64 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.
Natural gas jumped 2.2 percent and copper gained 2 percent. The GSCI has dropped 16 percent in the second quarter, the most since the final three months of 2008. New York oil has declined 23 percent this quarter.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net
