By Andrew Rummer - Oct 21, 2011 5:58 PM GMT+0700
Oct. 21 (Bloomberg) -- Steve Brice, chief investment strategist at Standard Chartered Plc, talks about the outlook for a European rescue fund to fight the region's debt crisis, and its potential implications for financial markets. Brice speaks with Susan Li on Bloomberg Television's "First Up."(Source: Bloomberg)
Oct. 21 (Bloomberg) -- Uwe Parpart, head of research at Reorient Financial Markets Ltd., talks about Europe's sovereign debt crisis and its implications for Asian economies and financial markets. Parpart speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
European stocks, U.S. index futures and commodities advanced amid speculation policy makers are moving closer to a deal to contain the euro-area debt crisis. The euro and Italian bonds pared losses.
The Stoxx Europe 600 Index climbed 0.9 percent at 11:57 a.m. in London, paring a weekly loss. Standard & Poor’s 500 Index futures added 0.4 percent. Copper jumped 4 percent after slumping 6.6 percent yesterday. The euro slipped 0.2 percent to $1.3759 after depreciating as much as 0.6 percent. The yield on Italian 10-year government bonds dropped to 5.95 percent.
European finance ministers meet in Brussels today to lay the groundwork for an Oct. 23 gathering of government leaders that had been the deadline for a solution to the debt crisis. A further summit was scheduled for Oct. 26 yesterday after Germany and France said the European Union needs more time to seal a “global and ambitious” accord.
“Markets have pretty much discounted a poor outcome coming into this so the potential for a short-term rally or surprise on the upside is definitely there,” Steve Brice, chief investment strategist at Standard Chartered Plc in Singapore, said in a Bloomberg Television interview.
$1.3 Trillion
European governments may deploy as much as 940 billion euros ($1.3 trillion) to fight the debt crisis, two people familiar with the discussions said yesterday. Negotiations on combining the EU’s temporary and permanent rescue funds as of mid-2012, while scrapping a ceiling on bailout spending, accelerated this week after efforts to leverage the temporary fund ran into European Central Bank opposition and provoked the French-German clash.
About five shares advanced for every one that fell on the Stoxx 600, helping the gauge pare its weekly loss to 1.5 percent. UniCredit SpA and BNP Paribas SA, the biggest banks in Italy and France, led a rebound in financial shares, climbing more than 2.5 percent.
The increase in S&P 500 futures indicated the U.S. gauge will rise for a second day. Microsoft Corp. (MSFT) slipped 0.7 percent in pre-market New York trading after the world’s largest software maker reported per-share earnings that were in line with analysts’ predictions.
Copper gained for the first day this week, to $7,005 a metric ton, after falling 11 percent the previous four days. Arabica coffee jumped to $2.35 a pound, with inventories of the beans at the lowest since March 2000, according to ICE Futures U.S. in New York.
Qaddafi Death
Brent oil in New York fell 0.2 percent to $109.54 a barrel. Libya’s state-run National Oil Corp. said Muammar Qaddafi’s death will help the return of crude output.
The MSCI Emerging Markets Index climbed 0.3 percent, after yesterday’s 2.7 percent drop. South Korea’s Kospi Index (KOSPI) added 1.8 percent on speculation company earnings will withstand a slowing global economy. The Shanghai Composite Index retreated 0.6 percent, capping the benchmark index’s steepest weekly drop in five months, on speculation slowing economic growth and the nation’s tighter monetary policies are hurting earnings.
The franc gained 0.4 percent against the euro and 0.2 percent versus the dollar. The Dollar Index, which tracks the U.S. currency against six trading partners, slipped less than 0.1 percent for a fourth day of losses.
Italy’s 10-year bond yield dropped five basis points to 5.95 percent. Spanish 10-year bonds snapped a nine-day decline, with yields falling two basis points to 5.50 percent.
ECB Bond Buying
The ECB bought small amounts of Spanish and Italian government debt today, according to two people with direct knowledge of the transactions, who asked not to be identified because the deals are confidential.
The cost to insure against default on French debt rose for a second day with credit -default swaps increasing two basis points to 191, according to data provider CMA. Contracts on Germany climbed two basis points to 93, Italy was up 5 basis points to 461 and Spain added two to 388.5 basis points.
“There’s a lot of information and a lot of uncertainty whether this weekend’s meeting will come out with a definitive plan,” said Stephen Halmarick, the Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The market is still very unsure and very uncertain.”
German business confidence fell to a 16-month low in October as the euro region’s worsening debt crisis threatened to push the economy into recession. The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, dropped to 106.4, the lowest since June 2010, from 107.4 in September.
S&P said in a report today that France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario. The ratings of Spain, Italy, Ireland and Portugal would also be reduced by one or two levels in either of two stress scenarios, the New York-based ratings firm said.
To contact the reporter on this story: Andrew Rummer in London at arummer@bloomberg.net
To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net
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