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Stocks, Commodities Gain on Spanish Debt Auction, IMF

Stocks surged and Treasuries fell as Spain sold more debt than targeted and the International Monetary Fund raised economic forecasts, overshadowing declines in U.S. housing starts and factory production. Commodities rose.

The Standard & Poor’s 500 Index added 1.6 percent to close at 1,390.78 at 4 p.m. in New York, its biggest gain in a month, and the Stoxx Europe (SXXP) 600 Index rallied 2 percent for its best advance of 2012. Yields on Spanish 10-year bonds fell 18 basis points to 5.89 percent and the Italian yield lost 12 basis points. Ten-year Treasury yields increased two basis points to 2.00 percent. Canada’s currency strengthened against 15 of 16 major peers as policy makers said they may boost interest rates. Oil helped lead gains in commodities.

The IMF increased its outlook for global growth in 2012 to 3.5 percent from 3.3 percent and lifted its forecast for the U.S. expansion to 2.1 percent from 1.8 percent, easing concern that Europe’s debt crisis will stifle the recovery. Spain sold 12-month and 18-month bills a day after yields on its 10-year bonds reached the highest level this year. German’s ZEW survey of investor confidence unexpectedly rose to a two-year high.

“It’s a collection of things that have ignited investors’ animal spirits again,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a telephone interview. “We’ve had the IMF upgrade of global activity, good news out of Europe and decent earnings reports so far. That’s boosting confidence.”

Apple Rebounds

The S&P 500 (SPX) climbed for the first time in three days, with energy and technology shares leading gains in all 10 of the main industries. The Dow Jones Industrial Average surged 194.13 points, or 1.5 percent, to 13,115.54. Apple Inc. (AAPL) rebounded 5.1 percent as brokerages including Stern Agee & Leach Inc. and Mizuho Securities USA Inc. advised buying the shares after a five-day, 8.8 percent tumble. Coca-Cola Co. (KO) rallied 2.1 percent after profit topped estimates, helped by demand in North America.

International Business Machines Corp. rallied 2.3 percent before releasing earnings after markets closed. Shares of the world’s biggest computer-services provider erased most of the gain in extended trading as first-quarter sales of $24.7 billion missed the average analyst estimate of $24.8 billion. Earnings of $2.78 a share, excluding some items, beat estimates by 4.9 percent and the company increased its full-year forecast.

Also after the close, Intel Corp. (INTC) predicted higher second- quarter sales than some analysts had estimated as it ships new personal-computer and server chips and shortages of hard drives abate.

Goldman Sachs Group Inc. (GS) retreated 0.7 percent after posting revenue from trading bonds, currencies and commodities that lagged behind Citigroup Inc. and JPMorgan Chase & Co.

Economic Data

Stocks rallied even after Federal Reserve data showed production at factories dropped 0.2 percent in March, the first decline in four months, as the industry cooled following the strongest surge in three decades.

A gauge of homebuilders in S&P indexes increased 1.4 percent as MDC Holdings Inc. and PulteGroup Inc. led gains in the group. Commerce Department data showed building permits increased 4.5 percent in March, defying the median economist estimate for a 0.7 percent decrease and overshadowing an unexpected, 5.8 percent drop in housing starts.

The IMF also increased its forecast for global growth in 2013 to 4.1 percent, up from a previous projection of 4 percent.

It raised its 2013 U.S. growth forecast to 2.4 percent.

“You have an improving outlook across the globe because of more positive sentiment,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “Although some of the economic reports in the U.S. were disappointing, they are in much better shape than they were last year. If you want the glass half full, there’s certainly some potential there.”

European Shares

The Stoxx 600 extended its rebound from four straight weeks of losses. Banco Santander SA, Spain’s biggest lender, and London-based Barclays Plc (BARC) rose more than 3.7 percent to help lead banking shares to the biggest advance among 19 industries. Afren Plc soared 6.3 percent after reporting a “significant” oil discovery in the Kurdistan region of Iraq.

Repsol YPF SA, Spain’s largest oil company, dropped 6.1 percent after the Argentine government took control of one of its units. Argentine President Cristina Fernandez de Kirchner seized control of YPF, replacing Chief Executive Officer Sebastian Eskenazi with Planning Minister Julio De Vido.

Euro, European Bonds

The euro weakened against 12 of 16 major peers, while gaining 0.5 percent against the yen. The shared European currency was little changed versus the dollar at $1.3131. The pound strengthened against 12 of its 16 most-traded peers after U.K. consumer prices rose 3.5 percent in March, the first increase in six months and .

The yield premium investors demand to hold Spanish 10-year government debt instead of benchmark German bunds declined 22 basis points to 414 basis points, or 4.14 percentage points, after yesterday reaching the highest level since November. Spain sold 3.18 billion euros of bills, compared with a maximum target of 3 billion euros.

Germany’s ZEW Center for European Economic Research’s index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 23.4 from 22.3 in March. Economists forecast a drop to 19, according to the median of 39 estimates in a Bloomberg survey.

Japan said it will provide $60 billion to the International Monetary Fund’s effort to expand its resources and shield the global economy against any deepening of Europe’s debt crisis. Finance Minister Jun Azumi made the commitment while speaking to reporters in Tokyo today before semiannual meetings of the IMF and World Bank in Washington April 20-22.

Canadian Dollar

Canada’s dollar rallied 0.9 percent to $1.0099 after Bank of Canada policy makers said higher borrowing costs “may become appropriate” because economic growth and inflation will be faster than it forecast. The central bank kept its main interest rate at 1 percent, extending the longest pause since the 1950s, as predicted by all 25 economists in a Bloomberg survey.

The S&P GSCI index of raw materials rose 0.5 percent, halting a two-day drop, as cocoa, nickel and oil led an advance in 17 of 24 commodities. Oil climbed 1.2 percent to $104.20 a barrel, a two-week high.

The MSCI Emerging Markets (MXEF) was little changed as rallies of more than 1 percent in benchmark gauges for Brazil, Israel Hungary were tempered by declines in Asia. Taiwan’s TAIEX dropped 1.9 percent. China’s inbound investment fell for a fifth month, the government said. The Shanghai Composite Index fell 0.9 percent.

The Sensex (SENSEX) index of Indian shares rose 1.2 percent on a higher-than-forecast benchmark interest rate cut. The Reserve Bank of India cut the repurchase rate by 0.5 percentage points to 8 percent, as predicted by three of 25 economists in a Bloomberg survey.

To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@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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