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Stocks Rise as French Banks Rebound; Treasuries Slump, Oil Gains

Euro Weakens on Greek Debt Concerns
A man holds euro notes in London. The euro weakened toward a 10-year low against the yen and gold halted a two-day decline amid speculation Greece is nearing default and before Italy sells bonds today. Photographer: Chris Ratcliffe/Bloomberg

U.S. stocks rose, Europe’s benchmark equity index rebounded from a two-year low and Treasuries fell as French banks dismissed concerns over their access to funds and investors watched for signs of progress in efforts to tame the euro region’s debt crisis.

The Standard & Poor’s 500 Index advanced 0.9 percent at 4 p.m. New York time. The Stoxx Europe 600 Index rose 0.9 percent. Societe Generale SA, which had plunged 8.1 percent, rallied 15 percent and BNP Paribas SA added 7.2 percent following a 12 percent retreat after the French banks said they are able to finance their operations. Yields on 10-year Treasuries climbed four basis points to 1.99 percent. Oil futures increased 2.3 percent. The MSCI Emerging Markets Index fell, extending its drop since this year’s peak to 20 percent.

German Chancellor Angela Merkel said she’s “very optimistic” that Finland’s demands for special collateral as part of the Greek bailout package will be met. Greek Prime Minister George Papandreou will hold a conference call with Merkel and French President Nicolas Sarkozy tomorrow to discuss developments in Greece and the euro area.

“It’s all about Europe,” 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. “Maybe the possibility of European authorities saying something could bring more certainty. We know there are opportunities out there.”

The S&P 500 briefly pared gains after Rheinische Zeitung reported that German Finance Minister Wolfgang Schaeuble said Greece wouldn’t get more aid.

‘Default Big’

Greece should default on its bonds to stop a deterioration of the economy, said Mario Blejer, a former Bank of England adviser who took the reins of Argentina’s central bank after its 2001 default on $95 billion. Yields on one-year Greek bonds climbed to more than 130 percent today.

“Greece should default, and default big,” Blejer, who was an adviser to Bank of England Governor Mervyn King from 2003 to 2008, said in an interview in Buenos Aires. “You can’t jump over a chasm in two steps.”

The Stoxx Europe 600 had fallen as much as 1.5 percent. Equities rebounded after Societe Generale, France’s third-largest bank by assets, said it could resist a freeze in dollar financing from U.S. money-market funds, which cut their lending to European banks amid the euro debt crisis.

“Even if it were to go to zero, there would be no problem,” Chief Executive Officer Frederic Oudea said in an interview on Bloomberg Television’s “InsideTrack” with Erik Schatzker and Deirdre Bolton. The bank could withstand a freezing of financing from U.S. money-market funds “forever,” Oudea said.

BNP Dispute

Nicolas Lecaussin, director of development at France’s Institute for Economic and Fiscal Research, wrote in an opinion piece in the Wall Street Journal today that an unidentified BNP Paribas official told him the bank could no longer borrow in dollars. BNP Paribas denied the claim in an e-mailed statement, saying it is able to finance its dollar needs at normal levels “directly and through foreign-exchange swaps.”

Banks in the Stoxx Europe 600 Index advanced 3.6 percent, the most among 19 industries, after they retreated 2.2 percent. The S&P 500 Financials Index added 0.6 percent. Morgan Stanley climbed 3.3 percent.

The Dow Jones Transportation Average, considered a proxy for the U.S. economy, rallied 3.4 percent. Delta Air Lines Inc. jumped 8.3 percent, United Continental Holdings Inc. advanced 7.4 percent and Kansas City Southern added 5.9 percent.

Bear Market

The MSCI Emerging Markets Index lost 0.6 percent, extending its slump since peaking on May 2 to 20 percent, meeting the common definition of a bear market. Brazil’s Bovespa slumped 0.3 percent and the Shanghai Composite Index slumped 1.1 percent.

Treasuries extended their losses as the government sold $21 billion in 10-year notes at a record low yield and concern eased that Europe’s debt crisis may cripple the region’s financial institutions.

The notes drew a yield of 2 percent, below the previous record of 2.140 percent at last month’s offering. The average forecast in a Bloomberg News survey of 10 of the Federal Reserve’s 20 primary dealers was for a yield of 1.998 percent The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.03, compared with an average of 3.13 at the previous 10 sales.

Silver futures added 2 percent while natural gas climbed 2.5 percent and gold increased 1.3 percent.

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