Global Stocks Fall on Greek Debt Impasse as Oil Rises With Bunds

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U.S. stocks rose for the first time in three days and Treasuries advanced on speculation the Federal Reserve won’t rush to raise interest rates amid uncertainty over Greece’s future in the euro. European equities rebounded from a four-month low, while crude oil rallied.

The Standard & Poor’s 500 Index climbed 0.6 percent by 4 p.m. in New York, rising above its average price for the past 100 days. The Stoxx Europe 600 Index gained 0.6 percent after reversing a 1.1 percent loss. The euro weakened 0.3 percent to $1.1248. Yields on 10-year Treasury notes fell five basis points to 2.31 percent, while rates on German bunds slipped to 0.80 percent. U.S. crude rose for the first time in four days.

The Fed started its two-day policy meeting Tuesday, with investors speculating benchmark rates will be left unchanged and bets on an increase in September declining, according to Fed fund futures. While Greece ratcheted up rhetoric against its creditors, German Chancellor Angela Merkel struck a more conciliatory tone, saying she was counting on a June 18 meeting of euro-area finance ministers to end the standoff over a deal.

“This is squaring off before the Fed, with people looking at tomorrow’s meeting as not going to raise rates, but giving a clue toward December,” Mark Kepner, an equity trader at Chatham, New Jersey-based Themis Trading LLC, said by phone. “Maybe what they’re looking at is this may be a little later in the year then they expect. Yesterday was people concerned with the Greece news but as you digest what’s happening, and people saying it’s posturing.”

Mixed Data

The Fed is meeting as economic data continues to show uneven gains in the U.S. economy after a first-quarter slowdown. A report Tuesday indicated builders in the U.S. began work on fewer houses in May following a surge the prior month. That followed a disappointing factory report on Monday that helped send stocks lower.

The S&P 500 has gone nearly two months without a weekly move of more than 1 percent as it churns near its 100-day moving average.

“We had a selloff the last few days, and we’re seeing a bounceback from an oversold condition,” Matt Maley, an equity strategist at Miller Tabak & Co. in Newton, Massachusetts, said by phone. “I don’t think anyone wanted to be caught short ahead of the Fed meeting. The situation in Greece is still up in the air and will be for a little while, but it doesn’t look like that’s holding investors back today.”

Treasuries Boosted

Treasuries climbed a second day on concern Greece’s debt crisis may complicate the Fed’s intentions to tighten monetary policy. There’s 47 percent chance rates will be raised at the central bank’s September meeting, down from 53 percent as recently as Friday, data compiled by Bloomberg show. Chair Janet Yellen may provide further clues at a press conference June 17.

“Investors are a little apprehensive about Greece -- there hasn’t been any good news,” said Thomas Di Galoma, head of fixed-income rates and credit at ED&F Man Capital Markets in New York. “The Fed will be as dovish as they can be given what’s going on with Greece.”

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Five-year credit default swaps on Greek debt put the chance of the nation failing to adhere to its commitments at 83 percent, up from 79 percent on Friday. Lower-rated securities in the euro area underperformed as concerns over Greece bolstered investors’ perception of relative risk.

The Stoxx 600 erased a drop of as much as 1.1 percent as German shares rallied after the European Commission said it would restart talks with Greece if offered new proposals. Greece’s ASE Index fell 4.8 percent, completing the biggest three-day drop since anti-austerity party Syriza took charge of the government in January.

Minimizing Risk

The Greek impasse hasn’t deterred the euro from rallying this month. The single currency is trading above its 50- and 100-day moving averages on optimism the slowdown in inflation in the region has reached a bottom and that economic growth is gathering steam.

“The market correctly realizes that Greece is less of a risk than it was a few years back,” Anthony Valeri, a market strategist with LPL Financial Corp. in San Diego, said by phone. “Any kind of financial disruption is limited. Investors are correctly viewing this as more of an isolated incident that has far greater ramifications for Greece than it does for the global economy and financial markets.”

The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, rose 0.1 percent Tuesday.

Oil, Metals

For more, read this QuickTake: The Fed's Countdown

The MSCI Emerging Markets Index declined 0.5 percent to close at its lowest level since March 27 as investors awaited the Fed’s post-meeting statement and Thursday’s meeting on Greece. Russia’s ruble gained 1.3 percent versus the dollar amid the rebound in oil.

West Texas Intermediate crude rallied, adding 0.8 percent to $59.97 a barrel after a three-day, 3.1 percent retreat. U.S. oil inventories probably fell for a seventh week as refiners prepared to meet higher fuel demand in the summer, according to a Bloomberg survey before an Energy Information Administration report Wednesday.

Gold futures declined for the third time in four days, losing 0.4 percent to $1,180.90 an ounce. Contracts on Copper traded on the Comex slipped to a three-month low on concern the slowdown in China, the world’s biggest consumer of industrial metals, is cutting demand for raw materials.

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