Stocks, Copper, Euro Gain on Optimism Over Europe Debt; Yen Reaches Record
Stocks advanced, driving U.S. shares to a two-month high, as commodities and the euro rose on speculation Europe is moving closer to resolving its debt crisis and the Federal Reserve may seek further monetary easing. Spain and Italy’s government bonds gained.
The Standard & Poor’s 500 Index added 1.9 percent to 1,238.25 at 4 p.m. New York time, the highest level since Aug. 3. The Stoxx Europe 600 Index climbed 2.5 percent, erasing a weekly loss. Copper futures surged 5.4 percent, the most since June 2009. Oil for December delivery increased 1.6 percent. The euro advanced 0.8 percent, and the yen rose to a post-World War II high versus the dollar of 75.82. Spain’s 10-year debt broke a nine-day losing streak, and the yield on Italian 10-year notes dropped below 6 percent.
European finance ministers began a six-day negotiation aimed at preventing a Greek default and shielding banks. They approved a 5.8 billion euro ($8.1 billion) loan to Greece, and France retreated in a clash with Germany over how to expand the power of the bailout fund. The S&P 500 extended gains after Federal Reserve Vice Chairman Janet Yellen said a third round of large-scale securities purchases might become warranted.
“The market is really looking for something to grasp as the European saga continues,” Malcolm Polley, who oversees $1.1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania, said in a telephone interview. “They are saying that we may have a resolution. We don’t know that it will be the case because we’ve heard that story before. Hopefully they will finalize it.”
France softened its stance on expanding the rescue fund. Its view that the European Financial Stability Facility should get a banking license enabling it to borrow from the European Central Bank, “is not a definitive point of discussion for us,” French Finance Minister Francois Baroin told reporters today in Brussels. “What matters is what works.”
European governments may combine a temporary and permanent rescue fund to pool as much as 940 billion euros to fight the crisis, two people familiar with the matter said yesterday.
Aid of 256 billion euros for Greece, Ireland and Portugal have failed to stabilize markets or prevent the turmoil spreading to France, co-anchor with Germany of the European economy. Europe’s international image is “disastrous,” Luxembourg Prime Minister Jean-Claude Juncker told reporters before the Brussels meeting. “We’re not really giving a great example of a high standing of state governance.”
Yellen said today the Fed may need to resume buying securities to spur U.S. growth. Yesterday, Federal Reserve Governor Daniel Tarullo called for resuming large-scale purchases of mortgage bonds.
Banks in the Stoxx Europe 600 Index advanced 3.8 percent for the third-biggest advance among 19 industries. UniCredit SpA (UCG) and BNP Paribas SA, the biggest banks in Italy and France, climbed more than 6.2 percent.
The S&P 500 climbed for a second day as all 10 industries advanced. The measure rose a third straight week, the longest winning streak since February. It has added 1.1 percent since Oct. 14. McDonald’s Corp. rallied 3.7 percent as the world’s largest restaurant chain beat the average analyst profit estimate. Honeywell International Inc. rose 5.8 percent as a recovery in commercial aerospace helped income climb 44 percent.
The MSCI Emerging Markets Index climbed 1.4 percent, after yesterday’s 2.7 percent drop. Brazil’s Bovespa Index increased 2.3 percent. South Korea’s Kospi Index (KOSPI) added 1.8 percent on speculation company earnings will withstand a slowing global economy. The Shanghai Composite Index retreated 0.6 percent, capping the benchmark index’s steepest weekly drop in five months, on speculation slowing economic growth and the nation’s tighter monetary policies are hurting earnings.
Japan’s currency appreciated 0.7 percent to 76.29 yen versus the dollar after touching a record 75.82. The euro erased its weekly drop, ending with a 0.1 percent gain since Oct. 14.
Italy’s 10-year bond yield dropped 12 basis points to 5.89 percent. Spanish 10-year bonds snapped a nine-day decline, with yields falling six basis points to 5.47 percent. The European Central Bank bought small amounts of Spanish and Italian government debt today, according to two people with direct knowledge of the transactions, who asked not to be identified because the deals are confidential.
The S&P GSCI Index of 24 commodities rose 1 percent.
Arabica coffee in New York posted its biggest gain in more than two years as inventories fell to the lowest in a decade and harvests were delayed in Central America. Cocoa and cotton also gained. Futures for December delivery jumped 5.7 percent to settle at $2.4485 a pound.
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