Stocks Gain on U.S. Manufacturing; Euro, Spain Bonds Rise

European Stocks Gain, Euro Recovers Loss on Spanish Bank Tests
Information on Spain's IBEX 35 is displayed on an electronic screen inside the Madrid stock exchange in Madrid. Photographer: Angel Navarrete/Bloomberg

Stocks climbed, rebounding from the worst weekly drop in four months, as U.S. manufacturing unexpectedly expanded. Spanish bonds gained with the euro as stress-test results bolstered confidence in Spain’s banking system. Gold touched the highest price since November.

The Standard & Poor’s 500 Index rose 0.3 percent at 4 p.m. in New York, trimming earlier gains as Apple Inc. slumped. Spanish 10-year yields declined for a third day, slipping six basis points to 5.88 percent. The euro advanced against all 16 major peers. The S&P GSCI gauge of commodities added 0.2 percent as natural gas and sugar led gains. Gold futures pared gains after rising as much as 1.2 percent to $1,794.40. Treasury yields traded near three-week lows.

The Institute for Supply Management’s U.S. factory index rose to 51.5 in September from 49.6 a month earlier, surpassing the median economist estimate and the level of 50 that signals growth. Banks helped lead gains in Europe after Spanish stress tests revealed a capital deficit of 59.3 billion euros ($76 billion), less than the 100 billion-euro bailout the country was awarded to shore up its banks.

“The fact that manufacturing is beginning to recover will significantly reduce fears of a potential U.S. recession,” said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management. His firm oversees about $325 billion. “Fears regarding the euro zone have been diminishing in recent months and today represents another positive move in that direction.”

Economic Reports

Reports today showed euro-area manufacturing contracted less than initially estimated in September, Markit Economics said today. Chinese factory output weakened for a second month and big Japanese manufacturers became more pessimistic in the last quarter, according to the findings of official surveys. Unemployment in the euro area reached the highest on record.

The S&P 500 rebounded after last week sliding 1.3 percent, its worst retreat since the week ended June 1. Consumer-staples, health-care, energy and financial shares led gains in the benchmark index for U.S. equities today as six of its 10 main groups advanced.

Goldman Sachs Group Inc. advanced 2.8 percent after Barron’s predicted that the stock will rise as much as 25 percent within a year as capital markets improve. Ceradyne Inc. jumped 43 percent after 3M Co. agreed to buy the company for $860 million to expand its energy unit. Monster Worldwide Inc., the Internet recruiting service that is exploring a sale, increased 4.1 percent after DealReporter said the company is in talks with a private equity bidder.

Apple Retreats

Apple, the biggest company by market value, lost 1.2 percent to extend last week’s 4.7 percent drop, its first weekly decline since July. As it retreated, the S&P 500 trimmed an earlier gain of as much as 1.1 percent.

“Apple is a real market mover,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “Its fundamentals are in place, but after such a big run, we’re a seeing a breather. In the U.S., manufacturing data has limited the downside risk. Yet the market is still saying ‘show me’ and waiting for other data points.”

The S&P 500 may climb to a record 1,585 next year as economic growth improves amid stimulus efforts by global central banks, said John Stoltzfus, Oppenheimer & Co.’s chief investment strategist. The strategist’s forecast implies a 10 percent rally in the S&P 500 from the Sept. 28 close of 1,440.67.

Wall Street strategists so far are unanimous in predicting the S&P 500 will reach a record next year, according to the four firms that have made predictions out of 14 tracked by Bloomberg. Stoltzfus’ estimate is higher than the 1,575 level called for by Bank of Montreal’s Brian Belski while lower than predictions of 1,600 by Bank of America Corp.’s Savita Subramanian and 1,615 by Tobias Levkovich at Citigroup Inc.

September Returns

Emerging markets led global stocks to the fourth monthly gain in September, the longest streak since 2007, handing equity investors better returns than bonds, commodities and the dollar and pushing them ahead for the year.

The MSCI All-Country World Index of equities increased 3.2 percent last month including dividends, bringing its 2012 gain to 13 percent. The S&P GSCI Total Return Index of commodities slid 1.4 percent, trimming its yearly advance to 3.5 percent, while the U.S. Dollar Index lost 1.6 percent. Bonds of all types returned 0.31 percent, on average, according to Bank of America Merrill Lynch’s Global Broad Market Index.

Unprecedented steps by central bankers to fix the slowest global growth since 2009 have sent investors to equities. The U.S. Federal Reserve pledged on Sept. 13 a third round of asset purchases to revive the economy after unemployment stayed above 8 percent for 44 months. The European Central Bank announced an unlimited bond-buying program last month, the Bank of Japan unexpectedly expanded its asset-purchase fund and India’s central bank lowered the cash reserve ratio for lenders.

Bernanke Speaks

Fed Chairman Ben S. Bernanke today renewed a pledge to sustain record stimulus even after the U.S. expansion gains strength, while saying policy makers don’t expect the economy to remain weak through 2015.

“We expect that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economy strengthens,” Bernanke said today in the text of a speech in Indianapolis. Policy makers’ forecast to hold the main interest rate near zero until at least mid-2015 “doesn’t mean that we expect the economy to be weak through” that year.

Commodity Movers

The S&P GSCI added 0.2 percent as 16 of 24 commodities advanced. Oil increased 0.3 percent to $92.48 a barrel in New York. Sugar, natural gas and coffee rose more than 2.5 percent while wheat, cocoa and soybeans led declines.

All but one of 19 industry groups in the Stoxx 600 advanced as the gauge rebounded from last week’s 2.7 percent plunge, the biggest decline since June 1. Xstrata Plc rose 2.4 percent in London trading after its board recommended shareholders accept a $33 billion takeover offer by Glencore International Plc.

Air France-KLM Group gained almost 3 percent as the International Air Transport Association raised its 2012 global airline profit forecast by 37 percent. International Consolidated Airlines Group climbed 3.6 percent. Credit Agricole SA advanced 7.4 percent after entering exclusive talks to sell Emporiki Bank, its unprofitable Greek unit, to Alpha Bank SA.

‘Another Hurdle’

Banks in the Stoxx 600 climbed 2.2 percent as a group and contributed the most to the index’s advance.

“The stress tests are another hurdle overcome in easing the sovereign-debt crisis,” said Henk Potts, an equity strategist at Barclays Plc in London. “It’s absolutely right to rally on the back of the tsunami of stimulus we have seen.”

Unemployment in the economy of the 17 nations using the euro was 11.4 percent in August, the same as in June and July after those months’ figures were revised higher. An Oct. 5 report is forecast to show the U.S. jobless rate rose to 8.2 percent last month from 8.1 percent in August, economists surveyed by Bloomberg estimated.

Spain’s securities pared last week’s declines after Moody’s Investors Service said the recapitalization of the nation’s banks was positive for its credit rating.

Italy’s 10-year bond yield fell two basis points to 5.08 percent, while the rate on similar-maturity German bunds climbed one basis point to 1.45 percent. The yield on 10-year U.S. Treasuries lost two basis points to 1.61 percent.

The euro rose 0.2 percent to $1.2886 and 0.3 percent to 100.51 yen. The shared currency earlier weakened 0.4 percent against both.

Euro Manufacturing

A gauge of manufacturing in the 17-nation euro area based on a survey of purchasing managers was 46.1, a six-month high and above an initial estimate of 46 on Sept. 20, according to Markit. The index, which stood at 44 in July, has held for 14 months below 50, indicating contraction.

The MSCI Asia Pacific Index slipped 0.4 percent as almost two stocks fell for each that rose. Toyota Motor Corp., the world’s biggest carmaker by market value, lost 1.7 percent in Tokyo. Financial markets in China, Hong Kong and South Korea were closed for holidays.

China’s Purchasing Managers’ Index was 49.8 in September after a 49.2 reading in August, according to a report today by the National Bureau of Statistics and the China Federation of Logistics and Purchasing. In Japan, the Tankan index for large manufacturers fell in the July-September quarter to minus 3 from minus 1, the fourth negative reading, the Bank of Japan said today.

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