By Stephen Kirkland and Lynn Thomasson - Mar 14, 2012 7:46 PM GMT+0700
European stocks rose, the dollar strengthened and 10-year Treasury yields climbed to a four-month high after the Federal Reserve bolstered confidence in the U.S. banking system and raised its economic assessment. Copper fell after China signaled it would keep curbs on housing sales.
The Stoxx Europe 600 Index (SXXP) jumped 0.6 percent at 8:45 a.m. in New York. Standard & Poor’s 500 Index futures were little changed after the gauge closed yesterday at the highest since June 2008. The dollar rose against all 16 major peers. The U.S. 10-year yield increased for a sixth day, its longest advance since October 2010. The cost of insuring against default on European company debt declined to the lowest in more than seven months. Gold extended its drop to 4 percent in three days.
A financial trader uses a telephone as he works at his computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg
March 13 (Bloomberg) -- Kevin Lecocq, global chief investment officer at Deutsche Bank Private Wealth Management, discusses European and Chinese equities and the outlook for emerging markets. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
March 13 (Bloomberg) -- Charles Morris, who oversees the Absolute Return fund at HSBC Global Asset Management, discusses his recommendation for investing in Japan, U.S. technology stocks and gold. He speaks with Owen Thomas and Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)
March 14 (Bloomberg) -- Richard Anthony, head of derivatives and equities at BGC Partners LP, talks about investment strategy, the outlook for U.S. stocks and the euro. Anthony speaks with Erik Schatzker, Sara Eisen and Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
The Fed said yesterday that strains in global financial markets have eased and the labor market is gathering strength. In a separate statement, the central bank said 15 of the nation’s largest 19 banks may keep adequate capital levels even in a recession. European industrial output rose 0.2 percent in January from the previous month. Chinese Premier Wen Jiabao said relaxing property curbs could cause “chaos” in the market.
“The economy is holding up slightly better than anticipated and that has carried on into this quarter,” said Lucy MacDonald, the chief investment officer for global equities at RCM Ltd., which manages about $128 billion. “That’s quite encouraging.”
Banks Rally
The Stoxx 600 (SXXP) advanced for a second day as two shares gained for every one that declined. Barclays Plc and Credit Suisse Group AG led a rally in bank stocks, climbing more than 4 percent. The results of the Fed’s stress tests showed that almost three years of economic expansion have helped U.S. banks raise profits, rebuild capital and increase liquidity after the collapse of Lehman Brothers Holdings Inc. in 2008.
The Markit iTraxx Europe Index of credit-default swaps on 12 companies with investment-grade ratings fell 3.75 basis points to 125.75 basis points, the lowest since Aug. 2.
EON AG (EOAN), Germany’s largest utility, jumped 6.7 percent as earnings exceeded analysts’ estimates. Legal & General Group Plc surged 4.8 percent after the fourth-biggest U.K. insurer by market value boosted its dividend as full-year profit rose.
The Fed said that it expects “moderate economic growth” and predicted the unemployment rate “will decline gradually.” In their last statement in January, policy makers said growth would be “modest” and unemployment “will decline only gradually.”
Highest Since 2007
Futures on the Dow Jones Industrial Average were little changed after the measure closed at the highest level since 2007 yesterday. Citigroup Inc. (C) slumped 3.5 percent in German trading as it failed to meet minimum requirements in the stress test.
“I was expecting all of the banks to pass, but when you look at the terms, the stress tests were so onerous that a modest miss really isn’t all that discouraging,” said William Fitzpatrick, a Milwaukee-based financial-services analyst at Manulife Asset Management, whose team oversees $800 million.
The dollar advanced 0.3 percent against the euro and 0.8 percent versus the yen.
Britain is proposing to revive “perpetual gilts,” first used in the wake of the 1720 South Sea Bubble crisis, to allow the government to borrow for as long as possible at record-low rates, according to two people familiar with budget discussions. Chancellor of the Exchequer George Osborne will use his March 21 budget to announce a consultation on introducing bonds of up to 100 years and reviving debt with no fixed maturity.
The pound climbed against 14 of its 16 major counterparts, strengthening 0.1 percent versus the euro, while the yield on the 10-year gilt jumped 10 basis points to 2.28 percent.
The yield on the 30-year U.S. Treasury climbed five basis points to 3.31 percent before the government sells $13 billion of the securities, the last of three auctions this week totaling $66 billion. The two-year Italian yield slipped four basis points to 1.99 percent as the government sold 6 billion euros ($7.8 billion) of bonds today, with borrowing costs on its three-year debt falling to the lowest since October 2010.
Emerging Markets
The MSCI Emerging Markets Index (MXEF) advanced 0.2 percent, set for the highest close since March 2. Benchmark indexes in Turkey, Poland, Hungary and South Korea gained at least 1 percent. Russia’s Micex Index added 0.9 percent. The FTSE/JSE Africa All Shares Index (JALSH) rose 0.9 percent in Johannesburg.
China’s Shanghai Composite Index (SHCOMP) sank 2.6 percent, the biggest drop since Nov. 30. A gauge tracking Chinese property stocks in Shanghai slid 3.7 percent. Anhui Conch Cement Co. (600585), the nation’s biggest maker of the building material, fell 3.3 percent, and Poly Real Estate Group Co. (600048), China’s second-largest developer by market value, slumped 3 percent.
Copper lost 1.1 percent. Gold declined 1.7 percent to $1,645.68 an ounce after falling 1.6 percent yesterday. Oil retreated 0.4 percent to $106.26 a barrel.
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: Justin Carrigan at jcarrigan@bloomberg.net
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