Stocks, Commodities, Euro Advance on Economy, Spanish Auction

Stocks rose, sending the Dow Jones Industrial Average (INDU) to the highest since July, while commodities and the euro climbed as reports bolstered optimism in the U.S. and German economies and Spain’s borrowing costs decreased.

The Dow added 60.01 points, or 0.5 percent, to close at 12,482.07 at 4 p.m. in New York and the Standard & Poor’s 500 Index increased 0.4 percent to 1,293.67. The MSCI All-Country World Index (MXWD) gained 0.9 percent after the Shanghai Composite Index rose 4.2 percent, its biggest gain since 2009, as China’s economic growth topped estimates without dimming prospects for monetary easing. Copper closed at the highest price since October. The euro rose 0.5 percent to $1.2735 and Spain’s two- year note yield fell three basis points to 2.97 percent.

A U.S. Federal Reserve report showed manufacturing in the New York region expanded at the fastest pace in nine months, while German investor confidence jumped the most on record. Spain sold 4.88 billion euros ($6.2 billion) of bills at lower rates than previous auctions in its first offerings since S&P cut its credit rating by two steps last week. China’s economy grew 8.9 percent in the fourth quarter, the slowest in more than two years while topping the median 8.7 percent estimate.

“The economic data broadly exceeded expectations,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “That’s why we had an immediate lift to the market,” he said. “What the auction in Spain tells me is that the market is ahead of the rating companies.”

Rally Extended

The S&P 500 added to last week’s 0.9 percent advance as trading resumed following the Martin Luther King Jr. holiday yesterday. The index is up about 2.9 percent in 2012 for its best start to a year since 2003, according to data compiled by Bloomberg.

The Dow’s gain today was led by Merck & Co., Cisco Systems Inc. and United Technologies Corp., each of which climbed about 1.3 percent as 23 of 30 stocks (MXAP) in the average advanced.

The Federal Reserve Bank of New York’s general economic index rose to 13.5, the highest level since April, from a revised 8.2 in December. Economists projected the gauge would rise to 11, based on the median forecasts in a Bloomberg survey. Readings higher than zero signal expansion.

Energy, health-care and technology companies helped lead gains among nine of the 10 main industries in the S&P 500 today.

Earnings Season

Financial shares in the index slipped 0.8 percent as a group. Citigroup Inc. (C), the third-biggest U.S. bank by assets, tumbled 8.2 percent, the most since October, after profit unexpectedly fell amid a slump in trading revenue. Goldman Sachs Group Inc. is scheduled to report earnings tomorrow. Wells Fargo & Co. (WFC) climbed 0.7 percent to $29.83, the highest price since April, after posting record profit for the fourth quarter and full year, beating analysts’ estimates as mortgage financing improved.

Sears Holdings Corp. surged 9.5 percent, the most in the S&P 500, on speculation that the company may seek to go private. Carnival Corp. tumbled 14 percent after the Costa Concordia cruise ship ran aground off the coast of Italy on Jan. 13.

S&P 500 companies, which beat profit estimates in the previous 11 quarters, probably will report a 4.6 percent increase in per-share earnings during the September-December period, according to analysts’ estimates compiled by Bloomberg.

U.S. 10-year Treasury yields decreased less than one basis point to 1.86 percent after increasing four basis points earlier.

The Stoxx Europe 600 Index rose 0.9 percent to its highest level since August, led by carmakers and construction companies. Almost four stocks advanced for every one that retreated.

Afren Surges

Afren Plc climbed 13 percent, the biggest gain in the index, after saying that it has discovered oil and gas off the coast of Nigeria. Rio Tinto Group advanced 2.9 percent after the world’s third-largest mining company said its fourth-quarter iron-ore production rose to a record.

The yield on Spanish 10-year bonds dropped five basis points to 5.13 percent. The government sold 12-month debt at an average yield of 2.049 percent, compared with 4.05 percent at an auction on Dec. 13. It sold 18-month paper at 2.399 percent, down from 4.226 percent last month.

The yield on the European Financial Stability Facility bond due 2016 rose nine basis points to 2.10 percent. The EFSF sold 1.501 billion euros of 182-day bills at an average yield of 0.2664 percent, the Bundesbank said. The euro area’s bailout fund lost its top credit rating at S&P yesterday.

Italian, German Bonds

Italian bonds rose for a second day, sending the 10-year yield down 12 basis points to 6.50 percent. German bunds fell, with the 10-year yield rising two basis points to 1.79 percent. An index of German confidence improved 32.2 points to minus 21.6, the ZEW Center for European Economic Research in Mannheim reported.

Greek two-year yields decreased 2.70 percentage points to 163.94 percent. Greece is running out of time to avoid becoming the first euro nation to default after talks with lenders stalled ahead of a March 20 bond payment that will cost 14.5 billion euros ($18 billion) the country doesn’t have.

Prime Minister Lucas Papademos is due to meet tomorrow with a group representing private Greek bondholders after a five-day break to discuss forgiving at least half of the nation’s debt in the euro area’s first sovereign restructuring.

Greece Swap

Greece is insolvent and will default on its debts, Fitch Ratings Managing Director Edward Parker said. The euro area’s most indebted country is unlikely to be able to honor a March 20 bond payment of 14.5 billion euros ($18 billion), Parker said in an interview in Stockholm today. Efforts to arrange a private sector deal on how to handle Greece’s obligations would constitute a default at Fitch, he said.

Greece is nearing the agreement with private creditors that would give them cash and securities with a market value of about 32 cents per euro of government debt, according to Bruce Richards, a hedge-fund manager on the creditors’ committee, who said he is “highly confident the deal will get done.

Deutsche Bank AG Chief Executive Officer Josef Ackermann said he can’t rule out that talks to agree on a debt swap will fail.

The euro jumped 0.6 percent to 97.87 yen, snapping a two- day decline, as it strengthened versus nine of 16 major peers. The dollar depreciated against 14 of its 16 major counterparts, losing at least 0.8 percent versus South Africa’s rand, Mexico’s peso and South Korea’s won. The Dollar Index (DXY) declined 0.5 percent, retreating from a four-month high.

Commodities

Copper futures gained 2.5 percent to settle at $3.7295 a pound and touched a 16-week high of $3.759 a pound. The S&P GSCI gauge of 24 commodities gained 1.2 percent. Oil rose 2 percent to $100.71 a barrel, snapping a three-day slump, as France pushed for faster enforcement of Europe’s proposed ban on Iranian oil.

Natural gas fell for a sixth day on speculation mild weather will result in below-normal demand, losing 6.8 percent to $2.488 per million British thermal units, the lowest settlement price since March 2002.

The MSCI Emerging Markets Index rose 2.1 percent, reaching the highest level since November. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong surged 4.5 percent, the most since Dec. 1. While China’s economy expanded at the slowest pace in 10 quarters, growth beat the 8.7 percent estimate by economists in a Bloomberg survey. Benchmark gauges in Russia, India and Poland climbed at least 1.3 percent.

‘‘There’s a bias in China right now for more policy easing,” said Andrew Pease, Sydney-based chief investment strategist for the Asia-Pacific region at Russell Investment Group, which manages $150 billion. “We are hearing China’s senior leadership is very, very concerned about the outlook in Europe.”

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: Michael P. Regan at mregan12@bloomberg.net

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