By Stephen Kirkland and Shiyin Chen - Sep 27, 2011 6:53 PM GMT+0700
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Copper rose 2.7 percent and silver futures advanced 9.8 percent. Photographer: Chris Rank/Bloomberg
Sept. 27 (Bloomberg) -- Lothar Mentel, chief investment officer at Octopus Investments Ltd., talks about investment strategy for commodities and equities. He speaks with Owen Thomas on Bloomberg Television's "On the Move." (Source: Bloomberg)
Traders gesture as they work on the floor of the London Metal Exchange in London. Photographer: Simon Dawson/Bloomberg
Stocks gained for a third day and commodities rallied, with copper snapping a seven-day slump, on optimism European leaders will solve the region’s debt crisis. Treasuries and bunds declined.
The MSCI All-Country World Index added 2.1 percent, led by banks, at 7:45 a.m. in New York. The Stoxx Europe 600 Index jumped 3.3 percent as gauges in France and Germany climbed at least 4.4 percent. Standard & Poor’s 500 Index futures rose 1.7 percent. Copper jumped 3.9 percent and silver futures surged 11 percent. The 30-year Treasury yield increased 11 basis points, with the 10-year German yield gaining 13 basis points. Italian and Spanish 10-year bonds traded higher after the nations sold debt. The euro strengthened 0.5 percent to $1.3599.
U.S. Treasury Secretary Timothy F. Geithner predicted that European governments will use more force to resolve the region’s crisis after they heard the concerns of global finance officials during meetings in Washington last weekend. Opting for a government default in the euro region would be “voting for suicide,” European Central Bank Executive Board member Lorenzo Bini Smaghi said in an interview with the Australian Financial Review published today.
European leaders “finally get it,” Pacific Investment Management Co.’s Mohamed El-Erian said in a radio interview with Tom Keene and Ken Prewitt on “Bloomberg Surveillance.” Germany still faces major decisions on the nature of the European Union, and political challenges shouldn’t be underestimated, El-Erian said.
BNP Paribas
The Stoxx 600 is heading for the biggest three-day gain this month after sliding to a two-year low on Sept. 22. Allianz SE and Axa SA, Europe’s biggest insurers, climbed at least 9 percent. BNP Paribas SA and Deutsche Bank AG, the largest banks in France and Germany, rallied 9.7 percent and 10 percent, respectively.
The cost for European banks to convert euro payments into dollars, measured by the one-year cross-currency basis swap, declined to 68 basis points less than the euro interbank offered rate, from 70.5 basis points yesterday. The cost was 75 basis points under Euribor on Sept. 22, when the swap was the most expensive since December 2008.
“There has been no concrete alteration in the structure of the euro zone since the end of last week but the market has been willing to clutch at the idea that politicians at least recognize there is an urgent requirement for action,” Jane Foley, a senior foreign-exchange strategist at Rabobank International in London, said in a report today.
Default Risk
The cost of insuring against a default on European bank bonds fell, with the Markit iTraxx Financial Index of credit- default swaps dropping 16 basis points to 260, according to JPMorgan Chase & Co.
The gain in S&P 500 futures indicated the U.S. gauge will climb for a third day. Data today may show the S&P/Case-Shiller index of property values in 20 U.S. cities fell 4.4 percent from July 2010, according to the median forecast of economists surveyed by Bloomberg. A separate release may show consumer confidence climbed this month from the lowest in more than two years.
Silver futures rose after falling 26 percent the past three days, and copper rebounded from a 17 percent slide in seven days. Oil advanced 2.5 percent to $82.21 a barrel in New York.
Emerging Markets
The MSCI Emerging Markets Index added 4.3 percent, set for the steepest rally since May 2010, after closing yesterday at a two-year low. South Korea’s Kospi Index (KOSPI) jumped 5 percent, the most since January 2009. Indonesia’s Jakarta Composite index added 5 percent. Benchmark indexes gained more than 3 percent in Poland, Hungary and the Czech Republic. The rand appreciated 2.6 percent against the dollar as commodity prices surged.
Israel’s TA-25 Index rose 1.2 percent after the central bank unexpectedly cut the benchmark interest rate for the first time in 2 1/2 years yesterday after the market closed.
The two-year Treasury note yield rose as high as 0.2432 percent, the highest since Aug. 9, before the government sells $35 billion of the notes today.
The yield on the 10-year Spanish bond declined eight basis points. The government sold 3.22 billion euros ($4.3 billion) of three- and six-month bills, compared with the Treasury’s maximum target of 3.5 billion euros. The yield on the three-month debt was 1.692 percent, compared with an average of 1.357 percent when similar securities were last auctioned on Aug. 23. The six- month bills yielded 2.665 percent, compared with 2.187 percent last month.
Italy’s 10-year bond yield slid five basis points. The nation auctioned 8 billion euros of 182-day bills to yield 3.071 percent, up from 2.14 percent at the last auction of similar- maturity debt on Aug. 26. The Rome-based Treasury also sold 3 billion euros of 76-day bills to yield 1.808 percent. The 3.5 billion euros of 2013 bonds yielded 4.511 percent.
The 17-nation European currency appreciated 0.6 percent against the yen. The New Zealand dollar advanced 0.9 percent against the U.S. currency, with the Australian currency rising 0.8 percent. The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.9 percent.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net;
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
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