Stocks Advance as Italy Moves to Reduce Debt

By Michael Shanahan and Lynn Thomasson - Dec 5, 2011 4:47 PM GMT+0700

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Dec. 5 (Bloomberg) -- Joseph Tan, Singapore-based chief economist for Asia at Credit Suisse Group AG’s private-banking division, talks about China's economy and central bank monetary policy. A Chinese services index declined last month as the government’s campaign to curb inflation and asset prices damped demand. Tan speaks with John Dawson on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

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Dec. 5 (Bloomberg) -- Jesper Koll, head of equity research at JPMorgan Chase & Co. in Tokyo, talks about Japanese stocks and the nation's economy. Koll speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Stocks (MXAP) rose, extending the biggest weekly gain since March 2009, the euro strengthened and Italian borrowing costs dropped to a three-week low as Prime Minister Mario Monti proposed budget cuts and leaders prepared to meet on Europe’s debt crisis.

The MSCI All Country World Index climbed 0.2 percent as of 9:07 a.m. in London, adding to an 8.4 percent rally last week. The Stoxx Europe 600 Index added 0.5 percent, led by banks and insurers, while Standard & Poor’s 500 Index futures advanced 0.9 percent. The euro appreciated 0.4 percent to $1.3450. The yield on the 10-year Italian bond slid to 6.36 percent. Oil rose for a second day to $101.56 a barrel.

Monti will present the 30 billion-euro ($40 billion) plan, designed to reduce the euro-region’s second-biggest debt, to policy makers in Rome today. German Chancellor Angela Merkel is scheduled to meet French President Nicolas Sarkozy to advance a plan for stricter enforcement of the region’s deficit rules that will be presented at a leaders’ summit on Dec. 9.

“Everything points in the direction of something big coming out of this week’s meeting,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “In the early part of this week we will continue to see risk appetite improve.”

World Index

The MSCI All-Country World Index (MXWD) posted a sixth consecutive day of gains, the longest streak since October, and the Stoxx 600 rose for a second day. Italy’s FTSE MIB Index rallied 1.8 percent as Banca Monte dei Paschi di Siena SpA and Banco Popolare SC climbed more than 5 percent. Michael Page International Plc slumped 10 percent in London after the recruiter said annual pretax profit will miss analyst estimates.

French 10-year bonds outperformed benchmark German bunds, narrowing the difference in yield, or spread, between the securities by 10 basis points. The Spanish 10-year yield tumbled 17 basis points, dropping for the sixth consecutive day, the longest run of declines since August, while the Greek 10-year yield jumped 145 basis points, or 1.45 percentage points.

Germany is scheduled to sell as much as 3 billion euros of six-month bills today, while France and the Netherlands also auction short-dated securities.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments declined four basis points to 322, the lowest since Nov. 3. Contracts on Italy dropped 16 to 442 and Spain fell 13 to 369. The cost of insuring corporate and financial debt also slid to the lowest in a month.

Euro Advance

The euro advanced 0.3 percent versus the yen, while the Swiss franc depreciated 0.4 percent against the 17-nation currency, falling for the fourth successive day. The pound strengthened 0.4 percent to $1.5652, snapping a two-day decline.

S&P 500 futures expiring in December climbed to 1,254.7. Treasuries fell, pushing the yield on the 10-year note up three basis points to 2.06 percent. The Institute for Supply Management’s index of non-manufacturing industries may show U.S. services expanded in November at the fastest pace in six months, a sign the economy is accelerating in the final months of 2011, according to median forecast of 67 economists surveyed by Bloomberg News.

The MSCI Emerging Markets Index (MXEF) rose 0.2 percent, on track for its sixth straight gain in its longest winning streak since Oct. 28. The Shanghai Composite Index (SHCOMP) lost 1.2 percent after a Chinese purchasing managers’ index, a gauge of industries such as construction, retail and property, shrank for the first time since February. The Micex Index added 0.2 percent in Moscow as Prime Minister Vladimir Putin’s hold on parliament weakened. Benchmark indexes advanced more than 0.5 percent in Poland and Hungary.

The S&P GSCI index of 24 commodities climbed 0.5 percent, the second advance in a row, with gasoline rising 0.9 percent Iran said oil will breach $250 a barrel if nations threaten to ban its purchases, according to the Shargh newspaper. The country pumped 5 percent of the world’s oil last year, according to BP Plc’s Statistical Review of World Energy.

To contact the reporters on this story: Michael Shanahan in London at Mshanahan3@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net