Stocks Rebound, Commodities Rise

By Stephen Kirkland and Rita Nazareth - Nov 2, 2011 10:53 PM GMT+0700

U.S. stocks rebounded from a two-day slump and commodities rose, while the dollar and Treasuries fell, as a report showed American payrolls grew more than forecast and investors awaited the Federal Reserve’s statements on the economy and monetary policy. The euro strengthened.

The Standard & Poor’s 500 Index climbed 1.7 percent to 1,238.95 at 11:51 a.m. in New York. The Stoxx Europe 600 Index rose 0.9 percent. The Dollar Index slid 0.5 percent, snapping a three-day advance. Treasury 10-year yields added four basis points to 2.03 percent, the first increase in four days. The euro appreciated against 13 of its 16 major peers as European leaders prepared to ratchet up pressure on Greece to accept a bailout. Copper halted a two-day retreat and oil gained.

U.S. companies added 110,000 workers in October, according to ADP Employer Services, and economists surveyed by Bloomberg forecast the Fed is probably engineering a third round of asset purchases to bolster growth, even as a decision is unlikely to be announced today. European leaders plan to hold emergency talks with Greek Prime Minister George Papandreou in Cannes, France, on the eve of a Group of 20 summit. French President Nicolas Sarkozy said yesterday the “only way” to repair Greek finances is through the deal hammered out last week.

“You’re seeing a little greed overtake fear of what could come from Europe,” James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $333 billion, said in a telephone interview. “The U.S. is moving away from a recession. The data does not support the need for QE3,” he said referring to a third round of quantitative easing, or asset purchases.

Rebound After Slump

The S&P 500 fell 5.2 percent during the first two days of the week after Papandreou planned a referendum to allow voters to decide if Greece should accept the bailout, spurring concern the rescue would be rejected and the nation would default on its debt.

Sixty-nine percent of economists surveyed by Bloomberg say Fed Chairman Ben S. Bernanke will start a third round of quantitative easing, or QE3, with 36 percent predicting the move in the first quarter of next year, according to a poll of 42 economists from Oct. 26-31.

Financial, energy and commodity shares led gains among all 10 of the main industry groups in the S&P 500 today, with Citigroup Inc., DuPont Co. and Exxon Mobil Corp. rising at least 1.8 percent. All but one of the 81 stocks in the S&P 500 Financials Index (S5FINL) advanced, sending the group up 2.9 percent after a 4.7 percent plunge yesterday. Bank of America Corp. and Goldman Sachs Group Inc. climbed more than 3 percent, rebounding from losses of at least 5.5 percent yesterday.

European Stocks

The Stoxx 600 pared this week’s drop to 4.7 percent as basic-resource producers, auto companies and insurers led gains. Randgold Resources Ltd. rallied 8.2 percent after forecasting a 22 percent increase in gold output next year. Lloyds Banking Group Plc slid 7.4 percent as Chief Executive Officer Antonio Horta-Osorio took leave of absence from his duties following medical advice. Logica Plc sank 8.4 percent as the computer services provider had sales that missed estimates.

Benchmark indexes in Italy, France and Germany rose at least 1.5 percent, rebounding from plunges of at least 5 percent yesterday.

The euro strengthened 0.7 percent to $1.3803. The shared currency recovered after earlier paring gains as the European Financial Stability Facility said it will delay a planned 3 billion-euro ($4.1 billion) bond sale because of market conditions. The dollar weakened against 12 of 16 major peers, losing 0.5 percent to 78.01 yen.

“The dollar is softening into the meeting on talk of” quantitative easing, said Jane Foley, a senior currency strategist at Rabobank International in London. “That may be premature. We’ve had a glimmer of hope or optimism on the Greek situation,” which supports the euro, she said.

Bund Yields

German bund yields were seven basis points higher at 1.84 percent after dropping 26 basis points yesterday, the biggest decline since Bloomberg began collecting the data in 1992. Greek two-year yields rose as much as 944 basis points to a record 96.72 percent.

Germany sold 4 billion euros of five-year notes at a record-low yield of 1 percent, and Portugal raised 1.2 billion euros in a sale of three-month bills.

Papandreou stuck to plans to hold a referendum on Europe’s rescue package to confirm the nation’s membership of the euro amid signs his government may collapse. His grip on power weakened after a lawmaker from his socialist Pasok party defected, leaving him with 152 deputies in the 300-seat chamber, while another, Vasso Papandreou, called for the formation of a national unity government.

Default Swaps

The cost of insuring European debt fell as investors pared bets that Greece is headed for a disorderly default. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped 21 basis points to 711, according to JPMorgan Chase & Co. at 3 p.m. in London. The gauge yesterday increased by the most ever, signaling deteriorating perceptions of credit quality.

Copper climbed 2.8 percent to $3.6005 a pound as inventories of the metal in warehouses monitored by the London Metal Exchange dropped for a 10th consecutive day, the longest decline since July 6.

Oil rose 0.9 percent to $93.01 a barrel in New York, the first advance in four days. Futures pared gains as the U.S. Energy Department said stockpiles advanced 1.83 million barrels to 339.5 million last week, topping the median forecast for a 1 million barrel increase in a survey of analysts.

The MSCI Emerging Markets Index rose 1 percent, following its worst two-day decline in a month. The Hang Seng China Enterprises Index climbed 2.6 percent in Hong Kong. Russia’s Micex Index advanced 1.3 percent.

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