Global Stocks Set for Bull Market as Commodities Rise on Greek Debt Talks

By Stephen Kirkland and Lynn Thomasson - Feb 8, 2012 9:32 PM GMT+0700

Global stocks rose, with the MSCI All-Country World Index set to enter a bull market, and commodities extended the longest rally this year as Greek leaders negotiated conditions of a second aid package.

The MSCI index climbed 0.4 percent at 9:30 a.m. in New York, extending gains to more than 20 percent from its closing low on Oct. 4. The Standard & Poor’s 500 Index was little changed. The S&P GSCI Index of commodities rose for a fourth straight day, reaching a six-month high. The yield on German 10- year bunds advanced one basis point. The euro was little changed near a two-month high versus the dollar.

Greek Prime Minister Lucas Papademos meets today with the nation’s political leaders to negotiate terms required for a 130 billion-euro ($172 billion) rescue package. Copper stockpiles fell to the lowest since September 2009, the London Metal Exchange said today, a day after a report showed U.S. oil inventories dropped. Toyota Motor Corp., Asia’s largest carmaker, raised its net income, operating profit and revenue forecasts for the year ending March 31.

“Be 100 percent in equities,” Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest money manager, said in a Bloomberg Television interview from Hong Kong today. “I don’t have a view that the world is going to fall apart, so you need to take on more risk. You need to overcome all this noise and there are great values in equities.”

Fear Index

While geo-political risks have risen, including Iran’s nuclear ambitions and Syria’s bloody crackdown, investors are taking their cue from policy makers who are driving down interest rates and flooding the world with cash to prop up their economies. The VIX, a measure of equity volatility known as the “fear index,” fell to 17.1 on Feb. 3, the lowest level since July, according to the Chicago Board Options Exchange.

The S&P 500 closed at a seven-month high yesterday, having extended its rebound from last year’s low in October to almost 23 percent. Time Warner Inc. gained today after reporting profit excluding some items of 94 cents a share, beating the 87 cent estimate in a Bloomberg survey of analysts.

Profits have beaten estimates at 68 percent of the 299 companies in the S&P 500 that have released results since Jan. 9, data compiled by Bloomberg show.

The Stoxx Europe 600 Index advanced 0.2 percent, the first gain in three days, as banks and mining companies rallied. Reckitt Benckiser Group Plc climbed 2.9 percent as the maker of Nurofen painkillers and Dettol handwash said 2012 sales will increase at a faster pace than the industry.

Portuguese Banks

The Portugal PSI 20 Index jumped 2.7 percent for the biggest gain among 24 global developed markets. BancoPortuguese lenders Banco Comercial Portugues SA, Banco Espirito Santo SA and Banco BPI SA all surged at least 15 percent.

The yield on the 10-year U.S. Treasury rose one basis point to 1.98 percent before the government auctions $24 billion of the securities, the second of three auctions this week totaling $72 billion.

The German five-year note yield increased one basis point to 0.92 percent. The government got bids for 5.87 billion euros ($7.78 billion) of five-year notes at an auction today, exceeding the maximum sales target of 4 billion euros, the Bundesbank said in a statement.

Spanish 10-year bonds slid, driving the yield 18 basis points higher as the nation plans to add to its outstanding supply of the securities due in January 2022, according to a banker involved in the transaction. The yield on the Greek October 2022 bond fell 101 basis points, or 1.01 percentage points, to 33.14 percent, with the price rising to 21.48 percent of face value.

Papademos held an unscheduled meeting with the so-called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, to put the final touches on terms required for rescue package.

Default Risk

The cost of insuring against a default on European government bonds rose from the lowest in three months, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments climbing two basis points to 320.

The euro was little changed against the dollar after rallying 1 percent yesterday to an almost two-month high of $1.3261, while New Zealand currency rose against 15 of its 16 most actively traded peers.

The S&P GSCI gauge of 24 commodities rose 0.8 percent to the highest since Aug. 3. Copper gained 1.8 percent. Stockpiles of the metal fell to the lowest since September 2009, the LME said. Oil in New York climbed 1.5 percent to $99.90 a barrel. U.S. crude inventories fell 4.5 million barrels in the seven days ended Feb. 3, the first drop in three weeks, the American Petroleum Institute said yesterday.

The MSCI Emerging Markets Index rose 1.2 percent, heading for the highest close since Aug. 4. The Shanghai Composite Index advanced 2.4 percent and Taiwan’s Taiex Index jumped 2.1 percent. Russia’s Micex Index advanced for the first day this week, increasing 0.2 percent, as UBS AG upgraded the country’s equities to “overweight.”

The FTSE/JSE Africa All Share Index climbed 0.6 percent in Johannesburg as prices for industrial metals rose. The ISE National 100 Index gained 0.8 percent in Istanbul.

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