European Stocks, U.S. Futures Rally on G-20

By Daniel Tilles and Shiyin Chen - Oct 14, 2011 6:01 PM GMT+0700

European stocks, U.S. equity futures and commodities rallied as Group of 20 finance ministers began discussions on the debt crisis. French, Belgian and Spanish bonds declined after downgrades.

The Stoxx Europe 600 Index gained 0.8 percent at 11:56 a.m. in London. Standard & Poor’s 500 Index futures rose 0.9 percent and Google Inc. jumped 6.6 percent in early New York trading. Copper added 3.2 percent and United Nations carbon futures slid to a record low. The euro strengthened 0.4 percent versus the yen. The yield on French 10-year bonds jumped to a euro-era record relative to German bunds, Belgian 10-year yields added 10 basis points and Spanish two-year yields seven basis points.

The elements of the European rescue plan emerged as finance ministers and central bankers from the G-20 began talks in Paris, seeking ways to end the sovereign debt crisis. That helped counter concern Europe’s sovereign-debt crisis will worsen, after S&P cut Spain’s credit ranking and Fitch Ratings downgraded UBS AG, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc. U.S. data may show consumer confidence rose while retail sales increased at the fastest pace in six months.

“The G-20 finance ministers meeting today is likely to produce euro-supportive headlines,” Hans Redeker, head of foreign-exchange strategy at Morgan Stanley in London, wrote in a note today. “Increased firepower” for the International Monetary Fund “could be used to finance new IMF credit lines to prevent contagion from the Greek crisis from spreading to Italy and Spain, or to recapitalize European banks,” he said.

Debt Turmoil

Policy makers are discussing an expansion of the IMF’s firepower as part of a global G-20 agreement next month in Cannes, France, according to three officials, who declined to be identified because the discussions are not public. Talks are in preliminary stages as potential contributors wait to see what measures Europeans take to end the debt turmoil at an Oct. 23 summit, they said.

The Stoxx 600 headed for a third straight weekly gain, its longest stretch of weekly advances since April. Syngenta AG, the world’s biggest maker of agricultural chemicals, jumped 3.2 percent after reporting third-quarter sales that beat estimates. A gauge of basic resource companies posted the biggest rally of the 19 industry groups in the Stoxx 600. SAP AG gained 2 percent after the largest maker of business-management software said earnings and sales rose in the third quarter on rising demand for its services. SAP also reiterated its full-year forecast.

Google Beats Forecasts

Banks retreated after Fitch Ratings put more than a dozen lenders on watch negative as part of a global review. BNP Paribas SA dropped 3.5 percent and Societe Generale SA slipped 2.7 percent.

Google, the world’s most popular search engine, reported third-quarter revenue that beat estimates after the close of U.S. trading yesterday. A report due at 8:30 a.m. in Washington may show retail sales in the U.S. increased in September at the fastest pace in six months, boosted by vehicle purchases, economists said. A separate report at 9:55 a.m. New York time may show that consumer confidence climbed in October from the previous month, according to a survey of economists.

The extra yield investors demand to hold French 10-year bonds instead of benchmark German bunds widened eight basis points to 93 basis points, the most since the euro started in 1999. The Belgian two-year note yield increased 10 basis points, with the yield on Spain’s 10-year security eight basis points higher.

Copper, Oil

The cost of insuring European sovereign debt rose after S&P said it was downgrading Spain for the third time in three years because of slowing growth and concern rising defaults will undermine banks. The Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments gained three basis points to 337, after rising to the highest in more than a week.

Copper in London rallied as much as 3.5 percent to $7,566 a metric ton, poised for a second weekly gain. Stockpiles in London Metal Exchange warehouses decreased for an eighth day to the lowest level since April 13. Copper imports by China climbed for a fourth month to the highest level in 16 months in September, according to customs data.

Oil for November delivery climbed as much as 1.9 percent to $85.84 a barrel on the New York Mercantile Exchange, reversing an early decline.

UN Certified Emission Reduction credits for December next year sank to a record low of 7.27 euros a metric ton in intraday trading and were last at 7.43 euros on London’s ICE Future Europe exchange. The contracts can be used for compliance in Europe’s carbon emissions market.

Emerging Markets Gain

The MSCI Emerging Markets Index rose 0.2 percent, heading for its eight consecutive gain, the longest winning streak since July 2010.

The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong fell 2.2 percent. The National Bureau of Statistics said consumer prices rose 6.1 percent in September from a year earlier, the fourth consecutive month of inflation above 6 percent. China’s money supply grew at the slowest pace in almost a decade as inflation stayed above the government’s target, highlighting the risk that efforts to tame prices will trigger a slowdown.

The Micex Index jumped 2.4 percent in Moscow as oil rose. The ISE National 100 Index (XU100) rose 0.6 percent in Istanbul and the Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 1.2 percent.

The euro rose 0.2 percent to $1.3801 and climbed to 106.26 yen. The 17-nation currency’s 3.2 percent five-day gain versus the greenback left it on course for the biggest weekly advance since January. The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.2 percent.

To contact the reporters on this story: Daniel Tilles in London at dtilles@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net;

To contact the editor responsible for this story: Mark Gilbert at magilbert@bloomberg.net