SF: European Stocks Rally as Italian Note Yields Fall; Yen Weakens
Feb. 5 (Bloomberg) -- European stocks rebounded from their biggest drop in three months yesterday, while Italian two-year notes recovered after yields reached a one-month high. Oil advanced while the yen weakened.
The Stoxx Europe 600 Index rose 0.6 percent at 6:45 a.m. in New York. Standard & Poor’s 500 Index futures gained 0.5 percent. Italy’s two-year note yield slid 11 basis points to 1.62 percent after earlier reaching 1.77 percent, the highest since Jan. 3, while the cost of credit-default swaps insuring European investment-grade debt slid from the highest level in almost two months. The yen declined at least 0.4 percent against its major peers after Bank of Japan Governor Masaaki Shirakawa said he would step down next month. Oil climbed 0.6 percent.
Stocks are rallying after global equity markets slumped the most this year yesterday and the S&P 500 had its steepest drop since November on renewed concern Europe’s debt crisis will intensify. Companies from Munich Re to ARM Holdings Plc posted results that beat estimates and data today showed European services output shrank less than initially estimated. U.S. service industries probably grew last month at about the same pace as in December, economists said before a report today.
“The markets seem to be rebounding from what was probably an overdone move yesterday,” Lorne Baring, managing director at B Capital SA in Geneva, which oversees almost $500 million, said in a phone interview. “Sentiment is positive at the moment and earnings have generally beat expectations. This opens the way for the U.S. market to continue its upward trend.”
Results Beat
Two shares advanced for every one that fell in the Stoxx 600. Munich Re rose 2.4 percent, the world’s largest reinsurer, after proposed raising its dividend. ARM Holdings, whose chip designs power Apple Inc.’s iPhone and iPad, climbed 3.9 percent as fourth-quarter sales rose more than analysts predicted.
Virgin Media Inc. rallied 16 percent in London as the U.K.’s second-largest pay-television provider said it’s in talks with Liberty Global Inc. on a “possible transaction.”
Royal KPN NV sank 23 percent as the Dutch phone company reported an unexpected loss and said it plans to sell 4 billion euros ($5.4 billion) of shares to strengthen its finances. The cost of insuring against default on the Hague, Netherlands-based company’s debt fell, with credit-default swaps down 20 basis points at 161.
The Markit iTraxx Europe index of credit-default swaps linked to 125 companies dropped two basis points to 116, signaling an improvement in creditworthiness.
Yum Profits
The gain in S&P 500 futures indicated the U.S. gauge will rebound from yesterday’s drop, when the index sank the most since Nov. 14. Yum! Brands Inc., owner of the KFC and Pizza Hut fast-food chains, fell 5.8 percent in pre-market trading after saying profit this year will be less than it previously expected as a probe into its chicken suppliers hurt sales in China.
More than 20 companies in the S&P 500 are scheduled to report earnings today. Of the 267 companies that have released results so far in the reporting season, 74 percent topped analysts’ profit projections, according to data compiled by Bloomberg.
A report at 10 a.m. New York time may show service industries in the U.S. grew in January. The projected 55 reading in the Institute for Supply Management’s non-manufacturing index would follow December’s 55.7 result, the highest level in 10 months, according to the median forecast of 76 economists surveyed by Bloomberg.
Yen Slides
The yen slid 0.9 percent to 93.23 yen per dollar and fell 1.3 percent versus the euro. Shirakawa told reporters in Tokyo that he would step down on March 19, earlier than his previous plan for an April 8 departure.
The euro strengthened 0.4 percent to $1.3564. The Australian dollar slid 0.3 percent to $1.0405.
Oil climbed to $96.71 a barrel in New York. The S&P GSCI index of 24 commodities added 0.4 percent.
The MSCI Emerging Markets Index lost the most in six weeks, dropping 0.7 percent. The Hang Seng China Enterprises Index of companies listed in Hong Kong sank 2.8 percent, the biggest decline since July, led by China Petroleum & Chemical Corp. on a plan to sell shares. The Shanghai Composite Index gained 0.2 percent. Chinese companies traded on the mainland are priced at the biggest premium to Hong Kong-listed counterparts since Oct. 9, according to data compiled by Bloomberg.
India’s Sensex retreated 0.5 percent while Russia’s Micex added 0.2 percent.
--With assistance from Corinne Gretler in Zurich, Claudia Carpenter, Paul Dobson and Andrew Rummer and Michael Shanahan in London. Editors: Stephen Kirkland, Justin Carrigan
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
