Stocks Rise on Budget Optimism; Euro Drops on France
Global stocks surged the most since July amid optimism a deal can be reached to avoid automatic U.S. spending cuts and tax increases. Oil led commodities higher, while Treasuries fell. The euro fell after France lost its top credit rating with Moody’s Investors Service.
The MSCI All-Country World Index (MXWD) advanced 2 percent as of 4 p.m. in New York, ending an eight-day decline, and the Standard & Poor’s 500 Index jumped 2 percent to 1,386.89 for its biggest gain in two months. Oil rose to a one-month high amid concern Middle East unrest will disrupt supply. Treasury 10-year yields rose three basis points to 1.61 percent. The euro fell 0.3 percent to $1.2777 at 5:34 p.m. New York time, reversing an earlier gain.
House Speaker John Boehner and White House Press Secretary Jay Carney described a Nov. 16 meeting on the so-called fiscal cliff as “constructive.” France was cut to Aa1 from Aaa, Moody’s said after the close of U.S. markets, dealing a blow to President Francois Hollande’s efforts to show budget credibility in the face of a stalled economy. European finance ministers are due to meet in Brussels tomorrow as they aim to craft a plan for Greece’s next aid payout.
“This change and transition in taxation is much more important for equity allocations going forward than what people realize,” said Michael Shaoul, chairman of New York-based Marketfield Asset Management, which oversees $3.5 billion. He spoke in a phone interview. “The U.S. economy looks pretty good. Earnings are OK. As long as Congress doesn’t absolutely wreck it, it will be fine.”
The S&P 500 has gained an average 0.6 percent during the week of Thanksgiving, according to data since World War II compiled by Bloomberg. That compares with 0.15 percent in all calendar weeks in the same time frame.
Bank of America Corp., Verizon Communications Inc., Hewlett-Packard Co. and JPMorgan Chase & Co. jumped more than 2.6 percent lead the Dow Jones Industrial Average up 207.65 points to 12,795.96.
Apple Inc. jumped 7.2 percent, the most since April, after Topeka Capital Markets analyst Brian White said the stock’s recent slide was “insane” given its valuation, new products for the holidays and long-term growth opportunities. Apple had lost as much as 24 percent from its record in September, bringing its price-to-earnings ratio to 13.7.
Cisco Inc. (CSCO) rose 1.7 percent after the world’s largest maker of computer-networking equipment agreed to pay $1.2 billion for closely held Meraki Inc.
The S&P 500 had lost more than 5 percent from Nov. 6 to Nov. 15 as President Barack Obama’s re-election set up a showdown with the Republican-controlled House over the budget. The index increased 0.5 percent on Nov. 16, the first gain in four days, after Boehner said talks with Obama were constructive and he would accept an increase in government revenue if coupled with spending cuts.
“I am confident we can get our fiscal situation dealt with,” Obama said at a news conference in Bangkok yesterday, spurring optimism lawmakers would reach an agreement to avoid a $607 billion deficit-cutting package known as the fiscal cliff.
An S&P index of 11 homebuilders rallied 0.9 percent, extending its two-day gain to more than 4 percent. The National Association of Home Builders/Wells Fargo index of builder confidence rose to 46, the highest level since May 2006.
Existing home sales increased 2.1 percent to a 4.79 million annual rate, exceeding the median forecast of economists surveyed by Bloomberg, figures from the National Association of Realtors showed. The median price rose from a year ago as inventories dropped to the lowest level in almost a decade.
The Dollar Index (DXY) fell 0.5 percent, the most in a month. The U.S. currency weakened the most versus the Swedish krona, Norwegian krone and New Zealand dollar.
Crude for January delivery rallied 2.7 percent to $89.28 a barrel after Israel said it may expand an assault on the Gaza Strip. Israeli Prime Minister Benjamin Netanyahu said yesterday that the army is prepared to “significantly widen the operation,” raising concern Middle East unrest will disrupt oil supplies.
The Stoxx Europe 600 Index (SXXP) advanced 2.2 percent, rebounding from the biggest weekly drop in five months as all 19 industry groups advanced. BP Plc jumped 3.6 percent after the Sunday Times reported that Europe’s second-biggest oil company is planning a 3.7 billion-pound ($5.9 billion) buyback. HSBC Holdings Plc gained 3.8 percent in London after saying it’s in talks to sell a stake in Ping An Insurance (Group) Co. (2318), China’s second-largest insurer.
SAS AB jumped 23 percent after the Swedish airline won the backing of unions representing pilots and most of its cabin crew for plans to eliminate jobs and shrink the business. Fugro NV plummeted 14 percent, the biggest drop in four years, after the Dutch oil-services company cut its forecasts and said Chief Executive Officer Arnold Steenbakker will leave.
The Moody’s downgrade of France follows one by S&P in January and increases pressure on Hollande to find ways to bolster growth in Europe’s second-largest economy in the midst of the region’s three year-old debt crisis.
European finance chiefs are due to meet in Brussels tomorrow for the second time in a week after they agreed seven days ago to keep Greece’s bailout aid flowing. In addition to a disagreement between the European Union and International Monetary Fund over softening Greece’s debt target, the ministers will attempt to re-engineer the current bailout without asking taxpayers for more money.
Greek 10-year bonds rose for a seventh consecutive day, pushing the yield down 25 basis points to 17.22 percent.
Copper for delivery in three months advanced 2.6 percent to $7,804 a metric ton on the London Metal Exchange. All six main industrial metals traded on the bourse gained. Gold for immediate delivery rose 1.1 percent to $1,731.85 an ounce in London, gaining for the first session in three. Silver, platinum and palladium also advanced.
Saudi Arabia’s benchmark stock index slumped amid speculation over the king’s health after he underwent back surgery, which the government said was successful. The Tadawul All Share Index (SASEIDX) dropped 1.5 percent to 6,666.46, the lowest since Oct. 14.
Emerging-market stocks rose for the first time in eight days, led by exporters. Samsung Electronics Co., which got about 28 percent of its third-quarter revenue from America, and Cosco Pacific Ltd., the container-terminal arm of China’s largest shipping group, gained more than 1.9 percent. The Micex index in Russia, the world’s biggest energy exporter, rallied more than 1 percent and rose above its highest closing level in a week.
European Union carbon permits dropped to the lowest since July as supplies of new allowances were set to increase this week. The December contract lost 2.8 percent to 6.71 euros a ton on the ICE Futures Exchange in London.
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