Stocks Gain as Europe Acts on Debt Crisis

By Stephen Kirkland and Rita Nazareth - Nov 11, 2011 10:45 PM GMT+0700

Stocks rose, preventing a weekly decline for the Standard & Poor’s 500 Index, and commodities climbed as American consumer confidence improved and Europe took steps to address its debt crisis. Italy’s bonds gained and oil reached a three-month high.

The MSCI All-Country World Index increased 2.1 percent at 10:42 a.m. in New York, after falling 3.1 percent in the past two days. The Standard & Poor’s 500 Index advanced 1.9 percent, pushing it up 0.8 percent for the week and 0.5 percent in 2011. The euro appreciated 0.9 percent to $1.3730. The yield on the Italian 10-year bond declined 40 basis points. Oil in New York approached $99 a barrel.

U.S. equities extended an early rally after confidence among consumers topped estimates in November, bolstering optimism before the holiday shopping season. Italy’s Senate approved debt-reduction measures, paving the way for a new government led by former European Union Competition Commissioner Mario Monti, while Greece will swear in Lucas Papademos to head a unity government.

“Things are starting to settle back in,” Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., said in a telephone interview. His firm oversees about $355 billion. “The expectation was that Italy and Greece were going out of business. That was overdone. We’re going to see some necessary austerity measures put in place,” he said. “In the U.S., the economic numbers have absolutely turned the corner and are starting to accelerate.”

The S&P 500 rose for a second day, adding to an advance yesterday triggered by a drop in jobless claims and a retreat in Italian bond yields from records.

Disney Surges

Walt Disney Co. (DIS) surged 7.9 percent to lead gains in the Dow Jones Industrial Average after fourth-quarter earnings per share exceeded estimates on growth in cable TV and U.S. resorts. Bank of America Corp. and Boeing Co. climbed more than 3 percent as all 30 Dow stocks increased.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, the highest since June, from 60.9 in October. The median estimate of economists surveyed by Bloomberg News called for a reading of 61.5.

The Stoxx Europe 600 Index climbed 2.2 percent as all 19 industries advanced. A gauge of European banks rebounded 3.2 percent following two days of losses as BNP Paribas SA of France and the Royal Bank of Scotland Group Plc jumped more than 6 percent. Telecom Italia SpA gained 5.6 percent after third- quarter profit beat analysts’ estimates.

Yield Spreads

The extra yield investors demand to hold Italy’s 10-year debt instead of German bunds, Europe’s benchmark government securities, dropped 46 basis points after climbing to a euro-era record 575 basis points two days ago. The French-German spread narrowed 14 basis points after S&P corrected an erroneous message to subscribers yesterday that suggested the nation’s AAA credit rating had been lowered.

The Greek two-year yield rose to a record of 111 percent. The cost of insuring European sovereign debt fell, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments dropping 9.8 basis points to 334.

The euro strengthened against 10 of its 16 major counterparts. The U.S. currency fell against all 16, with the Dollar Index dropping 0.9 percent.

West Texas Intermediate oil climbed as much as 1.2 percent to $98.93 a barrel, the highest since July. Copper rose 2.1 percent. China, the biggest buyer of industrial metals, will focus on domestic growth to boost the world economy, Vice Finance Minister Wang Jun said in Honolulu.

The MSCI Emerging Markets Index climbed 1.7 percent. The Hang Seng China Enterprises Index in Hong Kong advanced 1.3 percent, Hungary’s BUX jumped 4 percent and Brazil’s Bovespa gained 2.1 percent. The Kospi Index (KOSPI) rose 2.8 percent after South Korea left interest rates unchanged, while India’s Sensitive Index lost 1 percent as the nation’s factory output slowed. Funds investing in developing-nation stocks took in $2.1 billion in the week ended Nov. 9, Citigroup Inc. said, citing data compiled by EPFR Global.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@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