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Stocks Rise in Europe, U.S. as Natural Gas Leads Commodity Gains

July 8, 2013
 
 

July 8 (Bloomberg) -- U.S. stocks rose for a third day as investors awaited the start of second-quarter earnings season and euro-area finance ministers met to discuss aid for Greece. European equities recovered from a July 5 slide, while shares and currencies in Asia declined.

The Standard & Poor’s 500 Index added 0.4 percent at 1:32 p.m. in New York and the Russell 2000 Index of smaller U.S. companies jumped 0.3 percent to a record. The Stoxx Europe 600 Index gained 1.4 percent to 292.37 after losing 1.3 percent on July 5, while the MSCI Asia Pacific Index slid 1.4 percent. The yield on 10-year Portuguese debt slipped 20 basis points to 6.93 percent. U.S. Treasuries rose after 10-year yields surged to a near two-year high. Egyptian shares tumbled the most in three weeks. Natural gas jumped more than 3 percent to lead commodities higher.

After markets closed in Europe, euro-area finance ministers approved a 3 billion-euro aid payment to Greece, according to a person familiar with the negotiations. U.S. stocks extended gains after European markets closed on July 5 as better-than- estimated jobs data overshadowed concern the Fed will reduce stimulus. Alcoa Inc. will start the second-quarter U.S. earnings season, reporting results after the market closes in New York today.

"The world looks rosy to investors again, after the U.S. market rallied on much better-than-expected employment numbers that investors finally seem to be interpreting as good news," said John Plassard, who helps oversee $28 billion as vice president at Mirabaud Securities LLP in Geneva. "With analysts having downgraded their expectations in recent weeks, we should be seeing fewer negative surprises in the U.S. earnings season, so sentiment is quite good before Alcoa reports numbers."

 

Stock Losses

 

Global equities lost more than $3.8 trillion in value and U.S. Treasury yields climbed to an almost two-year high since Fed Chairman Ben S. Bernanke signaled May 22 that the central bank’s asset-buying program could be tapered should the job market continue to improve. The purchases, currently at $85 billion a month, helped the MSCI World Index of developed markets rally 18 percent in the past year.

Trading of S&P 500 stocks was about 6.7 percent below the 30-day average at this time of day and volume for Dow Jones Industrial Average companies was 24 percent below average, data compiled by Bloomberg show.

Dell Inc. rallied 2.9 percent after the biggest shareholder-advisory firm said investors should accept founder Michael Dell’s buyout offer. Priceline.com added 3 percent after Morgan Stanley raised its recommendation on the stock.

The same equity analysts who lowered second-quarter profit growth predictions to almost nothing in 2013 are raising price forecasts, convinced the economy is growing fast enough to lure more investors and boost valuations.

 

Earnings Season

 

S&P 500 earnings grew 1.8 percent last quarter, down from a projection of 8.7 percent six months ago, according to more than 11,000 analyst estimates compiled by Bloomberg. At the same time, share-price targets for companies from GameStop Corp. to Goldman Sachs Group Inc. are rising at the fastest rate in two years. The U.S. equity gauge will increase 8.9 percent to a record 1,777.91 should the forecasts prove accurate.

Lower expectations helped about 73 percent of the companies in the benchmark measure exceed forecasts by an average of 5.1 percent for the first three months of the year, Bloomberg data show.

European stocks rebounded with trading 21 percent less than the 30-day average. Siemens AG jumped 4.1 percent as Osram Licht AG traded for the first time following a spinoff from the German engineering company. Siemens’s former lighting unit fell 1.1 percent after opening at 24 euros.

 

European Movers

 

Lloyds Banking Group Plc added 3.8 percent after a person with knowledge of the matter said former Standard Chartered Plc Chairman Mervyn Davies is assembling a group of investors to bid for part of the U.K. government’s stake in the mortgage lender. The Sunday Times reported that Singapore’s state-owned investment company made a preliminary approach about buying a 10 percent stake in Lloyds. Temasek said it does not comment on speculation.

Portugal’s PSI 20 Index climbed 2.3 percent. The country’s prime minister named Paulo Portas, the leader of the junior party in the governing coalition, as vice premier. The appointment helps cement a deal to hold the coalition together.

Egypt’s main stocks gauge tumbled 3.6 percent. Supporters of deposed President Mohamed Mursi clashed with the military today outside a main security installation, in violence that authorities said killed at least 40 people.

The MSCI Emerging Markets Index fell 1.1 percent, extending this year’s decline to 14 percent, compared with a 8.9 percent advance for the MSCI World gauge of developed nation shares. Benchmark indexes in Shanghai, Indonesia, Thailand and the Philippines lost more than 2.4 percent.

 

Emerging Currencies

 

India’s rupee, the Philippine peso, Malaysian ringgit and Thai baht declined at least 0.4 percent. Turkey’s lira rallied 0.9 percent from a record low as the central bank offered $500 million at currency auctions and said it would start "strong" monetary tightening.

U.S. 10-year yields declined eight basis points to 2.66 percent after touching 2.75 percent earlier today, the highest since August 2011. Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE Index rose to 117.89 on July 5, the highest since December 2010. The index has averaged 64.26 this year.

Australia’s 10-year bond yield climbed eight basis points to 3.90 percent.

Greek 10-year bonds rose for a second day, pushing the 10- year yield 39 basis points lower to 10.93 percent. Euro-area finance ministers approved Greece to receive 2.5 billion euros this month and the remainder of the 3 billion euro payment in October, said a person familiar with the matter, who asked not to be identified because the decision hasn’t been announced. The ministers agreed the payment at a meeting in Brussels today.

Natural gas rallied 3.2 percent to lead gains in commodities on speculation that hotter weather may spur demand for the power-plant fuel. Gold rose 1 percent to $1,235.88 an ounce and West Texas Intermediate oil was little changed around $103 a barrel. Oil trading in New York was about 27 percent above the average for the past 100 days, according to data compiled by Bloomberg.


--With assistance from Corinne Gretler in Zurich and Claudia Carpenter, Paul Dobson, Will Hadfield and Shelley Smith in London. Editor: Michael P. Regan

 

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net

 

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

 

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