By Stephen Kirkland - Nov 18, 2011 7:24 PM GMT+0700
Italian and Spanish bonds rose as the European Central Bank bought the securities to stem the debt crisis. U.S. stocks futures gained, signaling the Standard & Poor’s 500 Index will rebound from a one-month low, and the euro strengthened.
The yield on the Italian two-year note fell 20 basis points to 6.06 percent at 7:15 a.m. in New York. The cost of insuring against default on European government debt declined and the euro appreciated 0.9 percent to $1.3576. S&P 500 futures added 0.8 percent, while the Stoxx Europe 600 Index lost 0.2 percent. Gold advanced 0.7 percent to $1,734.22 an ounce.
“Every day when the ECB has come in and bought stressed debt, the euro has reacted favorably,” said Jane Foley, a senior currency strategist at Rabobank International in London. “There’s this psychology going on surrounding what the ECB might do, which is giving the euro some support.”
ECB President Mario Draghi said today governments shouldn’t lose any time in bolstering the region’s rescue fund. Europe is running out of options to fix its debt crisis and it’s now up to Italy and Greece to convince markets they can deliver austerity measures, Finnish Prime Minister Jyrki Katainen said yesterday. An index of U.S. leading economic indicators probably increased last month, analysts said before a report today.
The Italian 10-year note yield declined nine basis points, narrowing the difference with benchmark German bunds by 13 basis points. The Spanish two-year yield fell eight basis points. The ECB bought Spanish and Italian debt, according to at least three people with knowledge of the trades who declined to be identified. An ECB spokesman in Frankfurt declined to comment. Bund yields rose two basis points, climbing for the fourth day.
Bond Risk Slips
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell three basis points to 355, compared with a record of 362 reached on Nov. 15.
The cost for European banks to fund in the U.S. currency rose for a fifth day, to the highest since December 2008. The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, increased to 130.5 basis points below the euro interbank offered rate, from 129 yesterday.
The euro gained against 13 of 16 major peers. Swiss franc climbed against all 16 major peers, appreciating 0.3 percent versus the euro and 1 percent against the dollar. The Dollar Index, which tracks the U.S. currency against those of six trading partners, declined 0.8 percent, snapping four days of gains.
Leading Indicators
The S&P 500 sank 1.7 percent yesterday. The Conference Board’s gauge of the outlook for the next three to six months probably increased 0.6 percent in October, according to the median forecast in a Bloomberg News survey of 56 economists.
The Stoxx 600 declined for a second day. Chemring Group Plc sank 15 percent, the most in nine years, as the developer of missile-avoidance equipment for the Joint Strike Fighter said full-year earnings fell short of analysts’ estimates. Kemira Oyj, the Finnish maker of water-treatment chemicals, slid 13 percent after cutting sales and profit forecasts.
Silver jumped 2 percent to $32.3525 an ounce, after falling 6 percent yesterday.
The MSCI Emerging Markets Index dropped 1.5 percent. The gauge has fallen 3.6 percent this week, the most since the five days ended Sept. 23. The Hang Seng China Enterprises Index sank 2.7 percent after new home prices fell last month in some Chinese cities and a person with knowledge of the matter said the country’s banking regulator warned lenders that some projects backed by local governments may run out of funds.
Benchmark indexes fell by more than 1 percent in Russia, India, South Africa and Turkey. Funds investing in developing nations withdrew $183 million in the week ended Nov. 16, first outflows in five weeks, Citigroup Inc. said, citing data compiled by researcher EPFR Global.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: at swallace6@bloomberg.net
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