Commodities, U.S. Stocks Advance; Greek Bonds Drop on Downgrade
Commodities Gain, Snapping Five-Day Slump
Maurice Tsai/Bloomberg
Commodity bulls say the expanding global economy, led by China, India and Brazil.
Commodity bulls say the expanding global economy, led by China, India and Brazil. Photographer: Maurice Tsai/Bloomberg
May 9 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a second straight day, as commodity prices rebounded from the biggest weekly drop since 2008 and McDonald’s Corp. rallied after sales topped estimates. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
May 9 (Bloomberg) -- Michael Shaoul, chairman of Marketfield Asset Management, talks about the outlook for commodities. Shaoul speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
May 9 (Bloomberg) -- Spencer Patton, founder and chief investment officer at Steel Vine Investments LLC, talks about the outlook for commodity prices and his investment strategy. Patton speaks with Lisa Murphy on Bloomberg Television's "Fast Forward." (Source: Bloomberg)
May 9 (Bloomberg) -- Jeffrey Young, head of North American foreign-exchange research at Barclays Plc, discusses the pound and dollar, U.S. inflation compared with the rest of the world, and monetary policy at the European Central Bank, Federal Reserve and Bank of England. Young talks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
May 9 (Bloomberg) -- John Netto, president of M3 Capital LLC, talks about the outlook for oil and commodity prices. Netto speaks with Sara Eisen on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
May 9 (Bloomberg) -- Stephen Schork, president of Schork Group, discusses the outlook for oil prices. Schork speaks with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
May 9 (Bloomberg) -- Gavin Wendt, founding director at MineLife Pty Ltd., talks about the outlook for commodities prices. Wendt speaks from Sydney with Mark Barton on Bloomberg Television's "Global Connection." (Source: Bloomberg)
Commodities rebounded from the biggest weekly slide since 2008 amid optimism about economic growth and speculation recent declines were excessive, helping drive a rally in U.S. stocks. European equities fell and Greek bonds tumbled as Standard & Poor’s cut its rating on the nation.
The S&P GSCI Index of 24 raw materials jumped 3.6 percent, its biggest gain since 2009, at 4 p.m. in New York following last week’s 11 percent slide. Silver futures climbed 5.2 percent and oil rebounded 5.5 percent to above $102 a barrel. The S&P 500 increased 0.5 percent to 1,346.29 as energy and raw-material producers led gains, while the Stoxx Europe 600 Index lost 0.3 percent. Greece’s 10-year note yield rose 21 basis points to 15.71 percent. The euro strengthened 0.4 percent to $1.4367 versus the dollar after gaining as much as 0.9 percent earlier.
Last week’s rout in commodities prompted Goldman Sachs Group Inc., which forecast the plunge, to predict a possible recovery. German exports surged in March to a record monthly value, boosting confidence in the global economy after U.S. payrolls increased last week by more than economists forecast. S&P cut Greece’s rating two levels to B from BB- and said further reductions are possible as the risk of default rises.
“Commodities were due for a relief rally just based on the amount of selling pressure we saw last week,” said Brian Lazorishak, money manager at Chase Investment Counsel Corp., which oversees more than $1.5 billion in Charlottesville, Virginia. “The long-term trend of strength in commodities is still intact at this point. There’s solid demand on a worldwide basis which relates to the economy,” he said. “The impact of Greece’s downgrade is psychological. It just reminds investors that there are more problems over there.”
Oil, Silver, Wheat
Crude rose to $102.55 a barrel in New York after losing 15 percent last week, its biggest weekly slide since 2008. Silver rebounded after sinking 27 percent in the same period, its biggest weekly slump since at least 1975. Wheat jumped today as adverse weather in North America, Europe and Asia threatened to reduce global production.
Commodity bulls say the expanding global economy, led by China, India and Brazil, is boosting demand at a time when producers from BHP Billiton Ltd., the largest mining company, to BP Plc, Europe’s second-biggest oil producer, can’t keep up.
Jeffrey Currie, the London-based head of commodity research at Goldman, said in a May 6 interview that last week’s slide in commodity prices created an opportunity for more “upside potential” especially in the second half of the year. A month ago, Currie told investors they should be “underweight” in commodities.
Commodity Shares Lead
The S&P 500 recouped about one-quarter of last week’s 1.7 percent drop, which was led by energy and commodity producers amid the slide in oil and metal prices. Freeport-McMoRan Copper & Gold Inc. (FCX), the world’s largest publicly traded copper producer, climbed 3.4 percent. Cabot Oil & Gas Corp. rallied 5.5 percent to lead gains in all 41 energy companies in the S&P 500.
The Stoxx 600 fell for the fourth time in five days as banks and insurance companies led losses. Banco Santander SA (SAN), Spain’s biggest lender, slid 2.8 percent and Switzerland’s UBS AG (UBSN) also 1.9 percent.
MAN SE (MAN) gained 1.5 percent after Volkswagen AG (VOW) raised its holding in the maker of commercial vehicles to 30.47 percent, surpassing the 30 percent threshold requiring VW under German law to make a mandatory bid for the company. Volkswagen offered 95 euros a share, lower than the May 6 closing price of 96.52.
The euro weakened versus 10 of 16 major peers, losing 0.5 percent or more versus the Australian dollar, Swiss franc and Norwegian krone.
Greek-German Spread
The premium investors demand to hold Greek 10-year securities instead of benchmark German bunds rose 27 basis points to 1,261 basis points. The cost of insuring Greek debt for five years rose 30 basis points to a record 1,371 basis points, according to CMA prices for credit-default swaps. The Portuguese 10-year yield increased 12 basis points to 9.67 percent, while the equivalent-maturity Spanish yield advanced 8 basis points to 5.32 percent.
European leaders had an unscheduled meeting over the weekend, with Luxembourg Prime Minister Jean-Claude Juncker saying Greece “does need a further adjustment program.” Another credit-rating cut would make Greece the lowest-rated country in Europe as today’s reduction, the fourth by S&P since April 2010, left it even with Belarus.
Greek Debt
“The downgrade reflects our view of increasing sentiment among Greece’s key euro-zone official creditors to extend the debt payment maturities of their 80 billion euros ($115 billion) of bilateral loans pooled by the European Commission,” S&P said in an e-mailed statement. Moody’s Investors Service today placed Greece’s B1 rating on review for downgrade.
ECB President Jean-Claude Trichet signaled May 5 that policy makers may raise interest rates for a second time this year while avoiding an increase in June, threatening to boost borrowing costs as the region’s weakest economies struggle to cut debt.
U.S. Treasury 10-year note yields traded at almost the lowest level this year, little changed at 3.14 percent after decreasing for 10 of the previous 11 sessions. The yield fell to 3.13 percent on May 6, the lowest level since Dec. 8.
The Dollar Index slipped 0.2 percent to 74.673 as the U.S. currency weakened against 14 of 16 major peers.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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