Stocks Advance as Dollar Weakens on Fed Stimulus Bets

Global stocks rose for a fourth day, the longest rally since April, and the U.S. dollar weakened as investors speculated the Federal Reserve may announce more stimulus measures. The euro climbed as Spanish bond yields fell after the government met its target at a bill auction.

The MSCI All-Country World Index added 1.2 percent at 4 p.m. in New York and the Standard & Poor’s 500 Index (SPX) climbed 1 percent to 1,357.98, with both reaching the highest level in more than a month. The dollar depreciated versus 15 of 16 major peers, with the euro strengthening 0.9 percent to $1.2688. The yield on Spain’s ten-year note dropped 12 basis points to 7.04 percent, retreating from a euro-era record. Corn led gains in commodities as crop conditions deteriorated in the U.S. Midwest because of hot, dry weather. Oil rallied 0.9 percent.

Signs of faltering growth with inflation below a 2 percent target mean the Fed will announce new steps to boost the economy as soon as this week’s meeting, according to 12 of the 21 primary dealers who trade with the central bank. Group of 20 leaders were focusing their response to Europe’s financial crisis at a summit in Mexico as Greece’s creditors appeared set to ease bailout terms following elections.

“It’s possible that the Federal Reserve will do something else,” said David Kelly, who helps oversee about $394 billion as chief market strategist at JPMorgan Funds in New York. “They seem overly sensitive to the possibility that the market will react badly to them not taking action.”

Market Leaders

Shares of commodity producers, financial firms and industrial companies rose more than 1.2 percent to lead gains among seven of the 10 main groups in the S&P 500 today. Nvidia Corp. rallied 6.7 percent after Microsoft Corp. said its Surface tablet computer will be powered by the company’s Tegra processor. Microsoft rose 2.9 percent, while Apple Inc., maker of the iPad tablet, added 0.3 percent.

Oracle Corp., the world’s largest maker of database software, climbed 3.1 percent after fiscal fourth-quarter profit topped analysts’ estimates, buoyed by sales of new software licenses.

Bank of America Corp. jumped 4.5 percent to lead a rally in all 24 stocks in the KBW Bank Index, which jumped 2 percent. The Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, plans to help banks avoid being forced to buy back mortgages as it becomes concerned that lenders are tightening standards even for the most creditworthy home buyers.

The S&P 500 plunged 9.9 percent from a four-year high on April 2 through June 1 amid signs economic growth was slowing as Europe struggled to contain its debt crisis. It has rebounded more than 6 percent since then after the slump dragged the gauge’s valuation to 12.9 times companies’ reported earnings, the cheapest level since November, and investors speculated global policy makers will take additional steps to spur growth.

‘Clearly Unsure’

The Fed is scheduled to release its statement on interest rates and the economy tomorrow at 12:30 p.m. in Washington. The central bank kept the economy growing for nine-straight quarters by pumping $2.3 trillion into the financial system starting in November 2008 and shifting $400 billion into longer-term debt.

“There is no doubt the economy stinks but the Fed is quite clearly unsure, correctly or not, that it has the tools to affect outcomes in a sustainable manner,” Dan Greenhaus, chief global strategist at BTIG LLC in New York, said in a note to clients.

The Dollar Index, a gauge of the U.S. currency against six major peers, dropped 0.7 percent. The currencies of Brazil, South Africa and Mexico led gains against the U.S. dollar, strengthening at least 1 percent.

Commodities Gain

The S&P GSCI Index of commodities climbed 0.8 percent. Corn, coffee, sugar and cotton surged more than 3.5 percent as 15 of 24 materials tracked by the index advanced. Hot, dry weather in the next three days will increase stress on about a third of the Midwest crop, Commodity Weather Group LLC said in a report.

About 10 shares advanced for every one that declined in the Stoxx Europe 600 Index (SXXP), sending the gauge up 1.6 percent to its highest level in more than a month. Home Retail Group Plc surged 24 percent as sales at the Argos chain beat estimates. Whitbread Plc jumped 6.4 percent as first-quarter revenue increased. SAP AG rose 2.1 percent after Oracle’s results. Danone tumbled 6 percent after the world’s biggest yogurt maker cut its profitability forecast.

The cost of insuring Spanish sovereign debt fell from an all-time high as the nation sold 3.04 billion euros ($3.8 billion) of bills, compared with a target of 3 billion euros. Credit-default swaps on Spain fell 20 basis points to 601. The yield premium investors demand to own Spanish debt over benchmark German bunds narrowed 23 basis points to 551 basis points.

Spanish Auction

Spain’s government sold 2.4 billion euros of 12-month bills at an average rate of 5.074 percent, up from 2.985 percent paid on May 14. It also sold 639.3 million euros of 18-month debt at 5.107 percent, compared with 3.302 percent last month, the Madrid-based Bank of Spain said today.

The Italian 10-year bond yield fell 17 basis points to 5.92 percent.

The Helsinki 25 Index of Finland’s most-traded stocks rallied 2.2 percent and the nation’s 10-year bond yield rose 12 basis points to 1.91 percent. Finland raised its forecast for economic growth as private consumption is expected to offset slowing exports. Gross domestic product will expand 1 percent this year, 1.2 percent in 2013, and 2.1 percent in 2014, the Finance Ministry said. It had predicted growth of 0.8 percent for this year in an April forecast.

Euro Strengthens

The euro gained against 12 of its 16 major counterparts, strengthening 0.7 percent versus the yen.

Greece’s benchmark ASE Index of stocks surged 3.3 percent today and has rebounded 26 percent from a 22-year low on June 5.

A first step for Greece to renegotiate its bailout will be when the still to-be-formed government requests modifications to the 240 billion-euro ($303 billion) rescue programs, leading to a revision of Greece’s economic-performance targets sometime before September, a European official told reporters in Brussels today.

The MSCI Emerging Markets Index climbed 1 percent, gaining for a third day. India’s Sensex advanced 0.9 percent. Egypt’s EGX 30 Index tumbled 4.2 percent to the lowest level since January as a power struggle between civilian politicians and the ruling generals threatened to derail the country’s transition to democracy.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.