Stocks Advance, Oil Rises; Euro Weakens Against Yen Before Italy Bond Sale

By Shiyin Chen - Sep 13, 2011 2:07 PM GMT+0700

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A man holds euro notes in London. The euro weakened toward a 10-year low against the yen and gold halted a two-day decline amid speculation Greece is nearing default and before Italy sells bonds today. Photographer: Chris Ratcliffe/Bloomberg

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Sept. 13 (Bloomberg) -- Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., talks about gold prices and global financial markets. Naeimi, speaking with John Dawson on Bloomberg Television's "Asia Edge," also discusses the European debt crisis and Australia's business confidence. (Source: Bloomberg)

Stocks snapped a three-day drop that drove the MSCI All-Country World Index to a one-year low, oil and copper climbed, while the euro slid toward its weakest level since 2001 against the yen before Italy sells bonds today.

The MSCI index of global equities added 0.5 percent at 4:02 p.m. in Tokyo, after yesterday falling to the lowest close since Sept. 1, 2010. Standard & Poor’s 500 Index futures lost 0.1 percent. Oil rallied 0.8 percent in New York, copper jumped 1 percent and gold rose 0.6 percent. The euro depreciated 0.5 percent to 105.07 yen and fell 0.3 percent to $1.3634. The cost of insuring Asia bonds against default halted a three-day gain.

Italy will seek to raise as much as 7 billion euros ($9.5 billion) selling bonds today, after a government official said yesterday the nation held talks with China about potential investments in the euro area’s third-largest economy. German Chancellor Angela Merkel said she won’t let Greece go into an “uncontrolled insolvency” because of the risk of contagion for other countries, according to an interview with Inforadio.

The prospect of China buying Italian bonds “is a move in the right direction,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors Ltd., which manages almost $100 billion. “But I don’t think it will solve the deep root of the problem as the funding requirement of Italy is very large. You could slow the bleeding, but it won’t heal the wound,” he said in a Bloomberg Television interview.

Stocks Rebound

The Stoxx Europe 600 Index advanced 1.2 percent, rebounding from a two-day, 5 percent slump that sent the gauge to its lowest close since July 2009. Germany’s DAX Index rose 1.5 percent, France’s CAC 40 climbed 1.2 percent and the U.K.’s FTSE 100 Index increased 0.7 percent.

The MSCI Asia Pacific Index rose 0.4 percent after dropping 3.3 percent in the previous two days. Japan’s Nikkei 225 Stock Average added 1 percent and Australia’s S&P/ASX 200 Index rallied 0.9 percent. The Shanghai Composite Index fell 1 percent in China, where markets were closed for a holiday yesterday. South Korea and Hong Kong are shut today.

BHP Billiton Ltd., the world’s largest mining company, and Santos Ltd., Australia’s third-largest oil and gas producer, rose more than 2.3 percent each. HTC Corp. sank 4.9 percent after JPMorgan Chase & Co. lowered its rating on the smartphone maker to “neutral” from “overweight.” Nintendo Co. dropped 5.1 percent after analysts from brokerages including Macquarie Group Ltd. said the gamemaker may miss a sales target.

“Stocks are rebounding because they fell so sharply recently, but there’s nothing fundamentally good out there,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd. “The global economy is still a concern. Even though stocks fell a lot recently, they may fall further if Greece goes into a default and the financial system loses out.”

Italy, China Talks

The S&P 500 reversed losses in the last 90 minutes of trading after the Financial Times reported that Italy’s government was in talks with China Investment Corp. about “significant” purchases of Italian bonds and investments in strategic companies. The U.S. stocks gauge closed 0.7 percent higher, after falling as much as 1.6 percent. Yields on 10-year Treasuries were little changed at 1.96 percent today after gaining three basis points yesterday.

“The idea that the Chinese may step up and buy Italian bonds puts to halt the idea of contagion,” Jim Bianco, Chicago- based president of Bianco Research LLC, said in a Bloomberg Television interview. “The big question is whether they actually follow through and buy Italian bonds.”

The purchase of Italian bonds by China was not the focus of the talks, which took place in the past few weeks, the government official who spoke on condition of anonymity told Bloomberg News. The Italian treasury is selling debt today to help pay for 14.5 billion euros of bonds maturing on Sept. 15.

Euro’s Weakness

The euro weakened against 14 of its 16 major peers. The shared currency yesterday reached $1.3495, the weakest since Feb. 16, and touched 103.90 yen yesterday, the lowest since June 2001.

The chance of a default by Greece in the next five years has soared to 98 percent as Prime Minister George Papandreou fails to convince investors that his country can survive the euro-region crisis, credit-default swaps showed.

China’s yuan forwards declined 0.5 percent to 6.3215, the biggest slide since May, according to data compiled by Bloomberg. Taiwan’s dollar weakened 0.8 percent to NT$29.464 versus its U.S. counterpart, a five-month low. The island’s financial markets were also closed yesterday for a holiday. Malaysia’s ringgit weakened for a seventh day.

The cost of protecting Asian corporate and sovereign bonds from default dropped, with the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan falling 3.5 basis points to 176 basis points, Royal Bank of Scotland Group Plc prices show. The gauge has risen 21 basis points in the past three days of trading, according data provider CMA.

Gold, Oil

Gold for immediate delivery rose 0.6 percent to $1,826.63 an ounce, following a two-day, 2.9 percent drop. Bullion rose to an all-time high of $1,921.15 on Sept. 6. Cash silver jumped 1.5 percent to $40.8675 an ounce. Three-month copper added 1 percent to $8,840 a metric ton on the London Metal Exchange, also snapping two days of losses.

Oil for October delivery rose 0.8 percent to $88.90 a barrel on the New York Mercantile Exchange. An Energy Department report tomorrow may show crude inventories slid 3 million barrels last week, according to the median of 10 analyst estimates in a Bloomberg News survey. Gasoline supplies probably fell 500,000 barrels, the survey shows. The industry-funded American Petroleum Institute will report its own data today.

To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net