U.S. Stock Futures Rise as Spain Asks for Bailout to Help Banks

By Rita Nazareth - Jun 11, 2012 5:53 AM GMT+0700

U.S. stock futures advanced, following the biggest weekly rally in the Standard & Poor’s 500 Index this year, after Spain asked for a bailout of as much as 100 billion euros ($125 billion) to help shore up its banks.

S&P 500 (SPX) futures expiring in September rose 1.2 percent to 1,338.10 at 7:47 a.m. Tokyo time. They also gained after Chinese exports grew in May at more than double the pace analysts projected. The euro strengthened 1 percent to $1.2644.

Spanish Prime Minister Mariano Rajoy, who on May 28 said he wouldn’t seek a bailout, characterized the deal as a credit line for banks and an endorsement of his policies. The crisis in Spain, coinciding with the prospect of Greece exiting the euro after elections on June 17, roiled markets around the world, sending the euro to an almost two-year low on June 1 and raising Spanish borrowing costs to near euro-era records.

“This Spanish deal will at least alleviate some concern as we wait another week for the Greek election,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “This situation has been dragged out for longer than anybody wanted.”

The S&P 500 rose 0.8 percent on June 8, rebounding from an earlier decline, on optimism that weekend discussions among European finance officials could result in help for Spain. The benchmark stock index gained 3.7 percent last week amid speculation European and American central banks will join China in trying to spur economic growth.

Bear Market

European officials have failed to control the spread of a debt crisis that started in Greece at the end of 2009 and has now required a bailout in the euro area’s fourth-largest economy. Concern about a deepening of the region’s turmoil almost drove the S&P 500 into a bear market last year as the index tumbled more than 19 percent between April 29 and Oct. 3. Since then, the index surged as much as 29 percent to a four- year high in April, then lost 6.6 percent through last week.

“The Spanish deal is another Band-Aid,” said Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati. He spoke in a telephone interview. “Any pop that you get probably won’t be sustainable. Many investors are viewing this with skepticism. The problem is not going to be fixed by this amount. It’s not a solution, and people know the difference. Expect more volatility not less.”

U.S. stock futures also rose after Chinese exports climbed 15.3 percent from a year earlier in May, exceeding all 29 estimates in a Bloomberg News survey. Other reports showed industrial output and retail sales in China trailed forecasts, signaling last week’s cut in interest rates was aimed at countering a domestic slowdown. The nation announced the first cut in rates in more than three years on June 7.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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