U.S. Stocks Rise With Metals on China; Italy Bond Plunge

Stocks rose for a fourth day and metals rallied as economic data in China beat estimates and investors weighed prospects for a U.S. budget deal. Italy’s stocks and bonds slid as the prime minister planned to resign.

The Standard & Poor’s 500 Index increased less than 0.1 percent to close at 1,418.55 and the MSCI All-Country World Index added 0.1 percent, erasing an earlier 0.2 percent drop. Italy’s FTSE MIB sank the most in a month and the government’s 10-year bond yield had the biggest increase since August. Lead, nickel, zinc, aluminum and copper rallied at least 1.2 percent.

China’s factory output jumped 10.1 percent in November and retail sales rose 14.9 percent, reports showed yesterday. Italian Prime Minister Mario Monti said that while he lost support and will resign, he’s confident elections will result in a “highly responsible, EU-oriented government.” U.S. lawmakers from both parties are leaving rhetorical room for a split-the- difference budget agreement to avoid the fiscal cliff.

“China hit that trough and is starting to see an acceleration of growth,” Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a phone interview. “As far as our market goes, I don’t think there’s anything out there right now. It’s waiting on the politicians.”

Photographer: Scott Eells/Bloomberg

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. Close

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S.

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Photographer: Scott Eells/Bloomberg

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S.

Leaders in the U.S. need to agree on a budget to prevent more than $600 billion of automatic tax increases and spending cuts from coming into effect next year. U.S. President Barack Obama and House Speaker John Boehner met one-on-one yesterday at the White House. Representatives for the two said in statements afterward that “the lines of communication remain open.”

Market Leaders

Hewlett-Packard Co., Cisco Systems Inc. and Microsoft Corp. rose at least 1.7 percent to lead gains in the Dow Jones Industrial Average (INDU), while Home Depot Inc. and Verizon Communications Inc. had the biggest declines. McDonald’s Corp., the largest restaurant chain, advanced 1.1 percent after November sales rose 2.4 percent globally.

American International Group Inc. slid 2.3 percent after the insurer said superstorm Sandy will cost the company about $1.3 billion. Priceline.com Inc. retreated 5 percent after the online travel service was downgraded to hold from buy at Deutsche Bank AG.

Companies in the S&P 500 are paying less in interest on debt than any time in at least a decade, leaving investors more dependent on economic growth and corporate spending for equity gains in 2013.

Constituents of the benchmark gauge for American stocks such as Exxon Mobil Corp. and Walt Disney Co. cut interest expenses to 2.39 percent of sales in the 12 months ended Sept. 30 on average, the lowest level since at least 2002, according to data compiled by Bloomberg and Strategas Research Partners. With borrowing expenses at record lows, executives are finding it harder to squeeze costs, causing profit margins to contract for the first time since 2009.

Treasuries

Treasuries pared early gains, with the yield on 10-year notes down less than one basis point at 1.62 percent. The dollar weakened against 11 of its 16 major peers, with the Dollar Index slipping 0.1 percent. The euro climbed 0.1 percent to $1.2943, halting a three-day slump.

The Stoxx Europe 600 Index rose 0.1 percent, erasing an earlier 0.6 percent loss to close at its highest level since May 2011 as health-care and commodity companies led gains. The FTSE MIB tumbled 2.2 percent in Milan. UniCredit SpA, Italy’s biggest bank, and Intesa Sanpaolo SpA, the second-largest, sank more than 5 percent each.

STMicroelectronics NV climbed 4.4 percent as the European chipmaker struggling with competition from Asia said it will sell its stake in the ST-Ericsson joint venture as part of a strategy to make the company more profitable.

Italian Yields

Italy’s 10-year bond yield jumped 29 basis points to 4.82 percent, the biggest increase since Aug. 2. The cost of insuring Italy’s debt jumped, with credit-default swaps climbing 39 basis points to 292, the highest since Nov. 19. The yield on Spain’s 10-year debt climbed 11 basis points to 5.56 percent.

Prime Minister Monti said investors shouldn’t expect the imminent demise of his government to lead to a political vacuum that will fuel market turmoil in Italy. Monti’s predecessor, Silvio Berlusconi, announced he will run for the premiership to roll back Monti’s budget rigor.

German 10-year rates were up one basis point at 1.31 percent. The Markit iTraxx Crossover index of swaps linked to 50 mostly high-yield companies added two basis points to 481.

Industrial metals led gains in the S&P GSCI gauge of raw materials, while declines in natural gas and agricultural commodities left the gauge’s little changed. Gold for February delivery climbed for a third day, gaining 0.5 percent to $1,714.40 an ounce, amid speculation that the Federal Reserve will announce more bond purchases to spur the U.S. economy. The central bank will release its statement on Dec. 12.

Oil, Gas

Oil erased earlier gains, retreating 0.4 percent to $85.56 a barrel, while Brent crude advanced 0.4 percent to $107.39 as OPEC ministers began gathering in Vienna. U.S. natural gas futures fell 3 percent on forecasts of moderate weather next week that may limit heating-fuel demand.

The MSCI Emerging Markets Index rose 0.5 percent to a seven-month high. The Shanghai Composite Index jumped 1.1 percent, with trading volume 86 percent above the 30-day average. The Hang Seng China Enterprises Index of mainland companies climbed 0.7 percent and Russia’s Micex rose 0.4 percent. Brazil’s Bovespa gauge jumped 1.3 percent. The Egyptian pound weakened 0.3 percent to an eight-year low as opponents of President Mohamed Mursi vowed to keep up protests against a draft constitution.

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: Lynn Thomasson at lthomasson@bloomberg.net

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