By Stephen Kirkland and Rita Nazareth - Nov 7, 2011 10:31 PM GMT+0700
Nov. 7 (Bloomberg) -- David Blanchflower, a professor at Dartmouth College and Bloomberg Television contributing editor, talks about reports that Italy's Prime Minister Silvio Berlusconi may resign. Giuliano Ferrara, editor of newspaper Il Foglio and a former Berlusconi spokesman, reported today that the premier may step down within hours and push for early elections. Blanchflower speaks with Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Gold rose to a six-week high, while stocks were little changed and the euro trimmed its drop, as investors weighed potential changes to the leadership of European nations reeling from the debt crisis.
Gold for December delivery climbed as much as 1.6 percent to $1,784.80 an ounce as of 10:27 a.m. in New York. The Standard & Poor’s 500 Index swung between gains and losses near the 1,253 level as the Stoxx Europe 600 Index decreased 0.3 percent, recovering most of an earlier 1.8 percent decline. The euro slipped 0.1 percent to $1.3770 after slumping 0.8 percent. The Swiss franc fell against all 16 of its most-traded peers on a report that the nation’s central bank may move to weaken the currency. Ten-year Italian bond yields rose to 6.55 percent after reaching 6.68 percent. U.S. Treasuries fluctuated.
Italy’s parliament will vote tomorrow on the 2010 budget report as Prime Minister Silvio Berlusconi’s majority unravels. Greek Prime Minister George Papandreou agreed yesterday to step down, paving the way for the formation of a new government to get international aid. European finance chiefs will meet in Brussels today to work on a plan to raise the region’s bailout fund.
“The market appears to be in no man’s land and at the mercy of Europe’s newsflow,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $44 billion, said in a telephone interview. “The Europeans are doing some heavy lifting. The leadership has a good understanding of what needs to be done and they’ve set a goal for themselves. They are now going through the sausage- making process of crafting a solution.”
The S&P 500 fell 2.5 percent last week, its first weekly retreat since September. Amgen Inc. rallied 5.1 percent today after saying it will repurchase as much as $5 billion in stock. Jefferies Group Inc. surged 3.7 percent after saying it cut gross holdings in sovereign debt of Portugal, Italy, Ireland, Greece and Spain.
European Shares
Among European stocks, automobile companies and utilities led gains. Carrefour SA dropped 2.8 percent after Citigroup Inc. lowered its recommendation for the world’s second-biggest retailer to “sell” from “neutral.” Sandvik AB, the largest maker of metal-cutting tools, sank 1.6 percent after offering 6.19 billion kronor ($933 million) to buy the remaining shares of its subsidiary Seco Tools AB.
Stocks and bonds pared losses after Giuliano Ferrara, editor of newspaper Il Foglio and a former Berlusconi spokesman, reported that the premier may step down within hours and push for early elections. Berlusconi denied he’s stepping down, Ansa said, citing comments from the premier.
Italy’s 10-year bond yield trimmed gains after climbing as much as 31 basis points. The extra yield investors demand to hold Italian 10-year bonds instead of German bunds, the euro region’s benchmark government securities, widened to as much as 491 basis points, or 4.91 percentage points, the most since the introduction of the euro in 1999, before retreating from the day’s high and trading at 466 basis points.
Allies Defected
Two Berlusconi allies defected to the opposition last week, and a third quit late yesterday. Six others called for Berlusconi to resign and seek a broader coalition in a letter to newspaper Corriere della Sera. More than a dozen more are ready to ditch the premier’s coalition, Repubblica daily reported yesterday, without citing anyone.
The yield on the 10-year Greek bond rose 123 basis points to 27.99 percent, climbing for the sixth straight day, while the two-year note yield touched a euro-era record. Papandreou and Antonis Samaras, head of the main opposition party, agreed to form a government to lead Greece “to elections immediately after the implementation of European Council decisions on Oct. 26,” according to an e-mail from the office of President Karolos Papoulias in Athens.
The yield on the 10-year German bund increased less than one basis point to 1.83 percent, while the French 10-year yield rose six basis points, driving the difference in yield between the two securities five basis points higher to 128.
Ready to Act
The euro weakened 0.3 percent versus the yen.
The Swiss franc slid 1.5 percent versus the 17-nation euro and the dollar. Policy makers remain ready to act in case the franc’s strength increases the risk of deflation and threatens the country’s economy, Swiss National Bank President Philipp Hildebrand told NZZ am Sonntag newspaper in an interview conducted Nov. 2 and published yesterday.
The MSCI Emerging Markets Index of stocks rose 0.1 percent, recovering from a 0.7 percent drop. The Shanghai Composite Index slipped 0.7 percent, and South Korea’s Kospi Index (KOSPI) decreased 0.5 percent. Markets in India, Turkey, Malaysia and the Philippines were closed for a holiday.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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