Euro Strengthens as Merkel, Sarkozy Meet
U.S. stocks advanced, adding to last week’s gain, as Alcoa Inc. (AA) rose before starting the earnings season and banks climbed. The euro rebounded from the lowest level versus the dollar since September 2010 as leaders discussed plans to shore up the currency.
The Standard & Poor’s 500 Index increased 0.2 percent to close at 1,280.7 at 4 p.m. in New York, while the Dow Jones Industrial Average rose 32.77 points, or 0.3 percent, to 12,392.69. The Stoxx Europe 600 Index slipped 0.5 percent. The euro appreciated 0.4 percent to $1.2770. Ten-year Treasury yields were little changed at 1.96 percent. Cocoa, soybeans and wheat climbed more than 2.7 percent while declines in oil, natural gas, gold and copper left the S&P GSCI index of 24 raw materials little changed.
Alcoa released fourth-quarter results that matched analysts’ estimates after U.S. markets closed, the first Dow company to report for the period. Greece’s struggle to contain its debt is a “special case” and no country must leave the euro, German Chancellor Angela Merkel told reporters after meeting with French President Nicolas Sarkozyin Berlin to consider measures designed to rescue the euro over the next three months.
“In the U.S., the earnings expectations have been lowered to a point that you’ll probably have an OK reaction,” Michael Holland, chairman and founder of New York-based Holland & Co., said in a telephone interview. His firm oversees more than $4 billion. “Europe is trying to figure out a way of getting some growth, but at the same time they have austerity.”
Alcoa, the largest U.S. aluminum producer, reported its first quarterly loss (AA) in more than two years after prices tumbled for the lightweight metal. The fourth-quarter loss of 3 cents a share, excluding restructuring costs, matched the average projection from 18 estimates compiled by Bloomberg. Sales rose 6 percent to $5.99 billion from $5.65 billion. Alcoa shares rallied 3 percent to lead gains in the Dow in regular trading and were little changed in extended trading after the close.
Companies in the S&P 500 may report earnings grew 6 percent in the quarter from a year earlier, the smallest quarterly gain since September 2009, according to projections compiled by Bloomberg as of Jan. 6. The S&P 500 climbed 1.6 percent last week after ending 2011 almost unchanged.
“We’ll see some earnings growth this year but not a lot,” Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., said in a telephone interview. His firm has more than $107 billion in client assets. “Europe is going to remain front and center.”
General Electric Co. (GE), Chevron Corp. and Wells Fargo & Co. paced gains that sent industrial, energy and financial shares to the biggest gains among 10 industries in the S&P 500. Netflix Inc., the film-streaming and mail-order DVD service, surged 14 percent after introducing its online service in the U.K. and Ireland.
The euro strengthened 0.3 percent to 98.15 yen, rebounding from the lowest level since December 2000. The Dollar Index, which tracks the U.S. currency against those of six trading partners, slipped 0.4 percent, falling for the first time in four days.
The Swiss franc strengthened against 13 of its 16 major counterparts, gaining 0.6 percent versus the dollar, after Swiss National Bank Chairman Philipp Hildebrand resigned amid scrutiny over his wife’s currency trading.
The Spanish 10-year yield declined 15 basis points to 5.56 percent, narrowing the difference with bunds by 14 basis points, while the Portuguese-German 10-year spread fell 18 basis points. Italian 10-year yields climbed three basis points to 7.16 percent.
The yield on the 30-year Treasury bond climbed one basis point to 3.02 percent, reversing earlier declines. The government will sell $32 billion of three-year notes tomorrow, $21 billion of 10-year debt the following day, and $13 billion of 30-year bonds on Jan. 12.
Euro-area leaders may complete their new budget rulebook by Jan. 30, one month ahead of schedule, and are considering accelerating capital contributions to the bailout fund being set up this year to stem the debt crisis. Merkel and Sarkozy outlined the increased pace of their response as the financial crisis that began in Greece in 2009 entered its third year amid concern that the future of the single currency itself was in doubt.
Sarkozy won the backing of German Chancellor Angela Merkel for a tax on financial transactions, a levy that Britain maintains won’t work unless it’s applied worldwide.
Almost two stocks fell for each that rose in the Stoxx 600 (SXXP). GlaxoSmithKline Plc (GSK) lost 4.1 percent, the most on a closing basis since January 2009, after the U.K.’s biggest drugmaker said it will hold further talks with U.S. regulators on requirements for a filing for the experimental drug Relovair for use against asthma.
UniCredit SpA, Italy’s largest lender, tumbled 13 percent as rights to buy its shares slumped in their first day of trading in Milan. After European markets closed, Commerzbank AG said its funding needs for the current year have fallen to as much as 6 billion euros ($7.66 billion), according a presentation Germany’s second- largest lender published on its website today. The bank, which raised more than 2 billion euros in 2011 for 2012, said in November that it anticipated a funding need of 6 billion euros to 8 billion euros for 2012.
The MSCI Emerging Markets Index added 0.6 percent as the Shanghai Composite Index surged 2.9 percent. Chinese stocks gained the most in almost three months after the central bank reported lending and money supply growth that exceeded economists’ estimates in December.
Hungarian shares rose for the first time in five days, sending the BUX Index up 3.5 percent, after Prime Minister Viktor Orban told state news service MTI yesterday his government was open to “any kind” of credit line with the International Monetary Fund.
Brazil (IBOV)’s Bovespa index increased 0.8 percent to lead gains among Latin American markets. The BSE India Sensitive Index slipped 0.2 percent after Prime Minister Manmohan Singh said the economy will have grown about 7 percent in the year to March 31, less than a December forecast of 7.5 percent.
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