By Rob Verdonck - Nov 28, 2011 7:22 PM GMT+0700
Nov. 28 (Bloomberg) -- John Vail, chief global strategist and head of asset allocation at Nikko Asset Management in Tokyo, talks about Europe's debt crisis and investment strategy. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Nov. 28 (Bloomberg) -- Graham Bibby, chief executive officer at Richmond Asset Management Ltd., talks about Europe's debt crisis, the outlook for global financial markets and his investment strategy. Bibby also discusses Federal Reserve monetary policy. He speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Stocks rose for the first time in 11 days and U.S. equity futures, commodities and the euro advanced as European leaders drafted a framework for the region’s bail- out fund and America’s Thanksgiving retail sales jumped to a record. Treasuries declined.
The MSCI All-Country World Index added 1.4 percent at 12:16 p.m. in London. Standard & Poor’s 500 Index futures rallied 2.7 percent, signaling the U.S. gauge may halt a seven-day losing streak. The euro strengthened 1 percent to $1.3367. The yield on the 10-year German bund advanced five basis points, with the similar-maturity Treasury yield jumping 10 points. The cost of insuring against default on European government debt fell for the first time in eight days. Oil rose 3.1 percent.
About $4.6 trillion was wiped from the value of global equities this month on mounting concern that Europe’s debt crisis is spreading. Bond markets in the euro area “are not functioning normally,” Bank of France Governor Christian Noyer said. Moody’s Investors Service said the “rapid escalation” of the crisis threatens all of the region’s sovereign ratings as Belgium paid the most since 2000 to sell debt. U.S. retail sales over the Thanksgiving holiday climbed 16 percent to a record.
“European leaders have been pushed into a position that they have to do something,” said Mike Lenhoff, the London-based chief strategist at Brewin Dolphin Securities Ltd., which oversees $39 billion. “We are getting to a point where policy makers are now responding. The message from the market is clear: get your act together or we are going to destroy you.”
Stocks (MXWD) Rebound
Industry groups tracking mining and financial stocks were the best performers on MSCI All-Country World Index, helping the gauge rebound from a 10-day, 9 percent slump. The index is valued at 11.1 times estimated profits, compared with a five- year average of 13.6 times, data compiled by Bloomberg show.
The Stoxx Europe 600 Index rallied 2.7 percent for its largest gain in a month as the gauge rebounded from its biggest weekly slide in two months. All 19 industries in the benchmark measure climbed more than 1 percent with gauges of banks and insurance companies posting the biggest gains. Deutsche Bank AG jumped 6.3 percent, BNP Paribas SA appreciated 8.7 percent, Societe Generale SA advanced 5.1 percent and UniCredit SpA added 4.4 percent.
The Organization for Economic Cooperation and Development said today that growing doubt about the survival of Europe’s monetary union has caused global growth to stall and represents the main risk to the world economy. The 34 OECD nations will expand 1.9 percent this year and 1.6 percent next, down from 2.3 percent and 2.8 percent predicted in May, the Paris-based organization said in a report.
German Trading
S&P 500 futures gained 2.8 percent, indicating the equity benchmark will rebound from its largest weekly retreat since September. AT&T Inc. added 1.9 percent in German trading as it was said to consider offering to divest as much as 40 percent of T-Mobile USA’s assets to convince the Justice Department to let the company take over the U.S. unit of Deutsche Telekom AG.
Retail sales totaled $52.4 billion during the holiday weekend and the average shopper spent $398.62, up from $365.34 a year earlier, the Washington-based National Retail Federation said yesterday, citing a survey conducted by BIGresearch.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, declined 1 percent, with the pound rising 0.8 percent to $1.5562. The euro appreciated 0.9 percent versus the yen.
New Zealand’s dollar surged 2 percent against the greenback after Prime Minister John Key was re-elected with his party’s biggest mandate in 60 years.
Preparing a Loan
The International Monetary Fund said today it isn’t discussing a rescue package with Italy after La Stampa newspaper reported it may be preparing a loan of as much as 600 billion euros ($802 billion).
The European Financial Stability Facility may insure bonds of troubled countries with guarantees of 20 percent to 30 percent of each issue to be determined in light of market circumstances, according to EFSF guidelines to be considered by finance ministers this week. Treaty change is necessary to give veto power over member-state budgets to the European Union Commission, Germany’s Finance Minister Wolfgang Schaeuble said on ARD television in Berlin yesterday.
Noyer reiterated his resistance to buying more government bonds from the euro area to shore up confidence, saying that “any lasting liquidity backstop” must come from governments and not the central bank. Monetary authorities from the U.S. and U.K., which have been buying “significant amounts” of public debt, would be risking spikes in long-term interest rates “in a different inflation environment,” and markets are already hedging against inflation “tail risks,” he said.
10-Year Yield
Belgian 10-year bonds fell 22 basis points to 5.65 percent after the nation sold 2 billion euros ($2.68 billion) of bonds maturing between 2018 and 2041. The debt agency in Brussels sold 450 million euros of bonds due in September 2021 at a weighted average yield of 5.659 percent, up from 4.372 percent in the previous sale on Oct. 31 and the most since January 2010. Demand for the securities was 2.59 times the amount of notes sold, up from 1.65 times a month ago.
It’s the first debt sale since Standard & Poor’s lowered Belgium’s credit standing one step to AA with a negative outlook on Nov. 25. Coalition talks produced a budget agreement less than 24 hours later.
Italian bonds rose for the first time in six days as the country’s banking association promoted an initiative to encourage purchases of the securities today. The yield on the 10-year security dropped 14 basis points after surging 62 basis points last week. The government sold 567 million euros of September 2023 index-linked bonds at a yield of 7.3 percent. The maximum target for the auction was 750 million euros.
15 Governments
The yield on the 30-year Treasury bond advanced 10 basis points to 3.02 percent, rising above 3 percent for the first time since Nov. 18.
The MSCI Emerging Markets Index (MXEF) jumped 2.2 percent, heading for its biggest gain in a month after closing last week at a seven-week low. The Micex Index surged 3.1 percent in Moscow as oil rose in New York. The Hang Seng China Enterprises Index (HSCEI) of Chinese stocks listed in Hong Kong gained 2.3 percent and the BSE India Sensitive Index (SENSEX), or Sensex, rose 3 percent, the most since Aug. 29.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped from a record, falling seven basis points to 378. Debt-insurance costs for European financial companies also fell from the highest ever, with the Markit iTraxx Financial Index of default swaps linked to the senior bonds of 25 banks and insurers declining 18 basis points to 340.
Gasoline climbed 3 percent to $2.5224 a gallon. Copper jumped 2.7 percent to $7,422.75 a metric ton. New York silver futures advanced 2.8 percent, leading gains in the S&P GSCI index of 24 commodities, which gained 2.2 percent, the most since Oct. 27.
To contact the reporters on this story: Rob Verdonck in London at rverdonck@bloomberg.net.
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net.
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