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Stocks Rise on Jobless Claims; Euro, Italy Bonds Gain

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Euro Will Fall as Crisis Engulfs Italy, Sinche Says
The euro lost 4 percent since the end of August as investor focus turned to Italy and whether it could implement sufficient austerity measures to avert a jump in bond yields similar to that in Greece. Photographer: Chris Ratcliffe/Bloomberg

(Corrects bid-to-cover ratio for Treasuries in first paragraph after "Treasury Auction" subhead.)

Nov. 10 (Bloomberg) -- Stocks rose, with the Standard & Poor’s 500 Index rebounding from its worst drop since August, as jobless claims fell while a retreat in Italian bond yields and the selection of a new Greek premier tempered concern about Europe’s crisis. The euro gained and Treasuries slid.

The S&P 500 rose 0.9 percent to close at 1,239.7 at 4 p.m. in New York. Italy’s 10-year bond yield, which surged to a record yesterday, dropped 36 basis points to 6.89 percent today as the European Central Bank bought the country’s debt and the nation sold all the bills planned at an auction. The euro appreciated 0.4 percent to $1.3601. Cotton and oil rose at least 1.8 percent to lead commodities higher. Ten-year Treasury yields lost six basis points.

U.S. equities resumed gains after falling earlier amid a surge in French bond yields. Stocks recovered as S&P said it did not cut France’s credit rating, clarifying a statement that suggested the rating had changed. Equities rallied as U.S. initial jobless claims decreased to the lowest level in seven months, Italy sold 5 billion euros ($6.8 billion) of one-year bills and former vice president of the European Central Bank Lucas Papademos was named Greece’s interim leader.

“I’m not willing to step up and proclaim all clear, but we’re moving in the right direction,” Don Wordell, a fund manager for Atlanta-based RidgeWorth Capital Management, which oversees about $47 billion, said in a telephone interview. “The new Greece premier was a great start and the fact that bond yields came back down is great for Italy. The most positive news of the day, though, was the jobless claims data showing that the U.S. economy is slowly getting better.”

Market Leaders

Gauges of energy, health-care and industrial companies rose more than 1 percent for the biggest gains among the 10 main industries in the S&P 500, all of which advanced. Merck & Co. surged 3.5 percent after increasing its dividend, while Cisco Systems Inc. rallied 5.7 percent after earnings topped analyst estimates. The two stocks led the Dow Jones Industrial Average to an advance of 112.92 points, or 1 percent, to 11,893.86.

Apple Inc. slumped 2.6 percent as Cleveland Research Co. reduced its earnings forecast and iPad-shipment estimates.

More than $1 trillion was erased from the value of global equities yesterday, with the S&P 500 sliding 3.7 percent, as a surge in Italy’s bond yields to euro-era records signaled Europe’s sovereign debt crisis was intensifying. The nation’s Senate today rushed to pass debt-reduction measures that clear the way for establishing a new government that may be led by former European Union Competition Commissioner Mario Monti.

Dollar Slips

The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.4 percent after advancing as much as 0.3 percent. The U.S. currency weakened against 12 of 16 major peers, with Brazil’s real and the South African rand climbing 1 percent for the biggest gains.

The 10,000 drop in jobless claims to 390,000 compared with the median forecast of economists in a Bloomberg News survey for 400,000 new claims. Another report showed the U.S. trade deficit unexpectedly narrowed in September to the lowest level this year as exports surged to a record high.

Federal Reserve Chairman Ben S. Bernanke said the central bank is concentrating “intently” on reducing unemployment and projects inflation to stay under control for the “foreseeable future.”

“For a lot of people, I know, it doesn’t feel like the recession ever ended,” even with the economy growing for two years, Bernanke said today in remarks at a town hall-style meeting at Fort Bliss in El Paso, Texas. “These problems are very serious, and we at the Federal Reserve have been focusing intently on supporting job creation.”

Treasury Auction

Treasuries fell as the U.S. sold $16 billion in 30-year bonds amid weaker-than-average demand. The bonds drew a yield of 3.199 percent, compared with the average forecast of 3.148 percent in a Bloomberg News survey of eight of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio was 2.4, compared with an average of 2.68 for the past 10 sales.

Existing 30-year bond yields increased eight basis points to 3.11 percent.

Among commodities tracked by the S&P GSCI, 10 rose and 14 retreated. Oil climbed 2.1 percent to $97.78 a barrel in New York, the highest level in more than three months. Delta Air Lines Inc. lost 4.8 percent to lead the NYSE Arca Airline Index down 1.6 percent amid concern about higher fuel costs. Copper fell 1.9 percent. Gold for December delivery lost 1.8 percent to $1,759.60 an ounce.

European Stocks

The Stoxx Europe 600 Index slipped 0.4 percent, erasing an earlier 0.8 percent gain. Credit Agricole SA lost 2.3 percent to help lead banks lower as French bond yields rose. Vedanta Resources Plc led a drop in mining shares, tumbling 9.5 percent. Air France-KLM Group retreated 5 percent after forecasting a full-year loss.

French 10-year bond yields climbed 27 basis points to 3.47 percent, a four-month high, and reached a euro-era record of 169 basis points above benchmark German bunds.

The cost of insuring against default on French government debt rose to a record. Credit-default swaps on France rose six basis points to 203, according to CMA prices, surpassing the record closing price of 202 set Sept. 22. The Markit iTraxx SovX Western Europe Index increased for a fifth day, climbing 2.4 basis points to 343.

S&P on France

S&P confirmed that France remains rated AAA with a stable outlook after a technical error caused the ratings company to send a headline suggesting it may have been downgraded. S&P is investigating the cause of the technical error, it said in a statement.

France may have its credit grade lowered by Egan-Jones Ratings Co. because the euro-region’s second largest economy is becoming one of its weakest.

France’s rating is “probably heading south” on France’s rating, Sean Egan, the firm’s president and founding principal, said in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. A list of Europe’s weaker countries “might extend also to France,” he said. Egan-Jones currently rates France AA-, he said in response to an e-mailed question after the interview.

The Italian two-year note yield slid 80 basis points to 6.40 percent, after jumping 82 basis points yesterday.

The ECB bought Italian government bonds today, according to three people familiar with the transactions, who declined to be identified because the deals are confidential. The ECB wasn’t immediately available for comment when contacted by telephone by Bloomberg.

Rescue Fund

European efforts to speed the setup of a permanent rescue fund have lost momentum amid a clash between Germany and France over provisions to force bondholders to share losses, three people involved in the negotiations said.

The European Commission cut its euro-region growth forecast for next year by more than half and said it sees the risk of a recession. Gross domestic product may grow 1.5 percent this year and 0.5 percent in 2012, the Brussels-based commission said today. It had earlier projected the 17-nation region to expand 1.6 percent and 1.8 percent this year and next, respectively. In 2013, the economy may expand 1.3 percent, the commission said.

The MSCI Emerging Markets Index slipped 2.5 percent. The MSCI Asia Pacific Index declined 3.3 percent, the most since Sept. 22. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong tumbled 5.7 percent as China’s export growth slowed.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

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

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