Stocks, French Bonds Gain After Debt Sale

By Stephen Kirkland and Lynn Thomasson - Jan 16, 2012 11:06 PM GMT+0700

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Jan. 16 (Bloomberg) -- Andrew Economos, head of sovereign and institutional strategy Asia ex-Japan at JPMorgan Asset Management in Hong Kong, talks about Standard & Poor's euro-zone credit downgrades and the outlook for the region's debt crisis, Asia stocks and his investment strategy. Economos speaks with Susan Li, Rishaad Salamat, Mia Saini and Zeb Eckert on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

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Jan. 16 (Bloomberg) -- Taiwan Stock Exchange Corp. Chairman Schive Chi talks about the bourse's outlook. Schive also discusses the re-election of Taiwanese President Ma Ying-jeou. He speaks from Taipei with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

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Jan. 16 (Bloomberg) -- Laurent Fransolet, head of European fixed-income strategy at Barclays Capital, talks about the euro-area rating downgrades by Standard & Poor’s. He speaks with Mark Barton on Bloomberg Television's "On the Move." (Source: Bloomberg)

Stocks rallied and French bonds rose as borrowing costs fell in the first sale of bills since Standard & Poor’s downgraded the country. The euro pared losses as the region’s central bank bought Italian and Spanish debt, while Portuguese notes fell and natural gas slid.

The Stoxx Europe 600 Index added 0.8 percent at 11:06 p.m. New York time and S&P 500 futures climbed 0.1 percent. U.S. equity and bond markets are closed today for the Martin Luther King Jr. holiday. Two-year French yields fell five basis points to 0.66 percent. The euro slipped 0.4 percent against the yen after touching an 11-year low, while Portugal’s 10-year yield jumped 183 basis points to 14.29 percent. Natural gas sank 4.5 percent, reaching a two-year low.

France sold the bills at a yield of 0.406 percent versus 0.454 percent at an auction of similar-maturity securities on Jan. 9. S&P warned on Jan. 13 that Europe’s efforts to fight its crisis are falling short as it lowered ratings on nine euro-area countries, cutting Portugal, Spain and Italy by two steps and France and Austria by one level. Greek officials will reconvene with creditors on Jan. 18 after discussions stalled last week over the size of investor losses in a proposed debt swap.

“The bill auctions have been carried out without a problem, which is helpful for market sentiment toward the euro area,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “The reaction to the S&P downgrade has been somewhat muted. The move wasn’t a surprise and was well-flagged for a number of the issuers.”

Carnival Tumbles

Fiat SpA and Daimler AG led European automakers higher, rising more than 3.9 percent. Carnival Corp. tumbled 17 percent in London, the biggest drop since October 2008, after saying the grounding of the Costa Concordia off Italy’s Tuscan Coast that killed at least five people will cost the company as much as $95 million, or between 11 cents and 12 cents a share, in fiscal 2012.

The euro fell as much as 0.5 percent to 97.04 yen, the least since 2000. The euro slipped 0.1 percent to $1.2674, after dropping 0.4 percent to $1.2626.

The European Central Bank bought Italian and Spanish government bonds, according to three people with knowledge of the deals.

The yield on France’s 10-year bond dropped five basis points to 3.03 percent. Spain’s 10-year yield fell four basis points to 5.18 percent, after advancing 10 basis points. The yield on Italy’s 10-year bonds dropped three basis points after climbing 22 basis points. Ten-year German bund yields were little changed at 1.77 percent.

Natural gas fell as much as 4.9 percent to $2.54 per million British thermal units, the lowest price for a most- active contract since September 2009. Copper gained 1 percent and oil in New York rebounded 0.8 percent to $99.44 a barrel, the first increase in four days.

The MSCI Emerging Markets Index declined 0.2 percent. The Shanghai Composite Index dropped 1.7 percent before tomorrow’s release of data that may show China’s economy grew at the slowest pace in 10 quarters. South Korea’s Kospi Index slipped 0.9 percent.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net