Stocks Pare Gains on Rescue Plan Concern

By Stephen Kirkland - Nov 22, 2011 5:14 PM GMT+0700

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Nov. 22 (Bloomberg) -- Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., talks about the outlook for global stock markets. Oliver also discusses the failure of a special debt-reduction committee in the U.S. Congress to reach an agreement, the nation's economy, and Europe's sovereign debt crisis. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Spanish bonds fell after borrowing costs rose at an auction. Stocks and U.S. equity futures pared gains after the finance spokesman for German Chancellor Angela Merkel’s political party said there’s no alternative plan to solve the region’s debt crisis.

Spain’s two-year note yield rose four basis points to 5.63 percent at 10:09 a.m. in London. The Stoxx Europe 600 Index increased 0.1 percent, after earlier climbing 1 percent. Standard & Poor’s 500 futures added 0.2 percent, paring gains of 0.6 percent. German 10-year bonds erased declines. Copper rallied 1.5 percent and gold rebounded from a one-month low.

Spain sold three-month bills at a yield of 5.11 percent, more than double the 2.292 percent yield the last time the debt was offered on Oct. 25. About $3.3 trillion has been wiped off global equity values this month amid concern Europe’s credit crisis is worsening.

“We haven’t any new bazooka to pull out of the bag,” Michael Meister, finance spokesman for Merkel’s Christian Democratic party, said today in a phone interview.

Stocks (MXWD) rallied earlier after Standard & Poor’s and Moody’s Investors Service kept the U.S.’s credit rating unchanged after Congress’s special debt-reduction committee failed to reach an agreement, setting the stage for $1.2 trillion in automatic spending cuts.

Three shares declined for every one that gained in the Stoxx 600. Thomas Cook Group Plc tumbled 67 percent as Europe’s second-largest tour operator said it held talks with banks on financing.

Missing Estimates

The S&P 500 slid to its lowest level since Oct. 7. Hewlett- Packard Co. fell 2 percent in German trading after forecasting first-quarter profit and fiscal 2012 earnings that missed analysts’ estimates. (HPQ) Campbell Soup Co. publishes its earnings before U.S. equity markets open today. A Commerce Department report due at 8:30 a.m. in Washington will reaffirm that the world’s largest economy grew at a 2.5 percent pace in the third quarter.

“When you look at valuation measures for global equities, they’re all running well below historical averages,” Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., said in a Bloomberg Television interview. “Very tough economic conditions are already priced in, probably something approaching a global recession.”

The yield on Spain’s 10-year bond rose two basis points after the government sold six-month bills at an average yield of 5.227 percent, compared with 3.302 percent last month.

The extra yield investors demand to hold Belgian 10-year bonds instead of benchmark German bunds increased seven basis points after Belgium’s coalition talks were suspended as Elio Di Rupo offered to resign from leading the negotiations.

The Greek two-year note yield climbed 153 basis points to 113.59 percent, with the price tumbling to about 29 percent of face value.

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