GM! Commodities, Stocks Gain as Profits Improve; Euro Weakens on Greek Concern
By David Merritt
April 26 (Bloomberg) -- Stocks rallied and commodities rose as corporate earnings improved, while the euro fell and yields on the bonds of Europe’s most indebted nations climbed. Greek bonds’ premium to German debt soared to a record.
The MSCI World Index of 23 developed nations’ stocks advanced 0.4 percent at 10:32 a.m. in London as the MSCI Emerging Markets Index added 1.1 percent. Futures on the Standard & Poor’s 500 Index increased 0.1 percent. Copper jumped as much as 1.5 percent and palladium rallied to its highest since March 2008. The euro slid against its 16 most-traded counterparts. The yield premium investors demand to hold Portuguese bonds climbed 13 basis points to a record. Greece’s rose 76 basis points.
Even after the biggest rally since the 1930s, the S&P 500 is trading at 14.2 times forecasts for corporate profits, lower than any time since 1990, excluding the six months after Lehman Brothers Holdings Inc. collapsed, data compiled by Bloomberg show. Greece, with 8.5 billion euros ($11.3 billion) of bonds maturing May 16, neared an emergency aid package as investors said any delay may trigger another sell-off in its assets.
“It’s a back-and-forth between the strong economic recovery and concerns that could derail it, but the positive forces are stronger,” said Rudolf Buxtorf, who helps manage about $500 million at RBS Coutts Bank in Zurich. “There are no alternatives to equities. We have strong cyclical forces and liquidity is still there.”
European Stocks
The Stoxx Europe 600 Index rallied 1.1 percent as shares of raw-materials producers and banks advanced. BHP Billiton Ltd., the world’s largest mining company, rose 1.1 percent in London. Julius Baer Group Ltd., the 120-year-old Swiss private bank, climbed 3.3 percent in Zurich after Deutsche Bank AG advised buying the shares. TomTom NV soared 7 percent in Amsterdam after Europe’s biggest maker of portable navigation devices reported an unexpected profit.
The MSCI Asia Pacific Index climbed 1.6 percent, its biggest gain in more than five weeks. Toyota, the world’s largest carmaker, jumped 3.4 percent in Tokyo after the Nikkei newspaper said the company had an annual operating profit instead of the loss the company forecast. Taiwan Semiconductor Manufacturing Co. climbed 2.9 percent in Taipei.
The gain in U.S. futures indicated the S&P 500 may extend its 0.7 percent rally on April 23, when it closed at the highest level since September 2008 and erased losses spurred by the government’s fraud lawsuit against Goldman Sachs Group Inc. on April 16.
Corporate Earnings
Earnings estimates for S&P 500 companies climbed 9.1 percent on average in April, twice the gain in their prices and the largest monthly increase since at least 2006, data compiled by Bloomberg show. About 84 percent of companies on the benchmark gauge that have reported first-quarter earnings have topped estimates.
Polish stocks led gains in emerging markets as the benchmark WIG 20 Index jumped 2 percent, the most in three weeks, while the Budapest Stock Exchange Index rallied 1.9 percent after Hungarian voters returned Fidesz leader Viktor Orban to power with 263 seats in the 386-strong parliament. Russia’s RTS Index advanced 1.5 percent as Credit Suisse Group AG raised the country’s equities to 5 percent “overweight” from 5 percent “underweight,” citing a potential 10 percent appreciation to the RTS Index by year-end.
Greek Stocks
Greek stocks and bonds tumbled on concern a euro-region bailout for the country may not be enough to prevent a default and might even be replicated in other indebted nations. The ASE Index dropped 1.7 percent and the yield on Greece’s benchmark two-year note jumped more than 100 basis points to 12.06 percent. Credit-default swaps on Greek government debt rose 4.5 basis points to 619, according to CMA DataVision prices. That means it costs $619,000 annually to insure against default on $10 million of bonds for five years. The contracts are down from a peak closing price of 639 basis points April 22.
The euro slipped 1 percent compared with the pound, 0.4 percent versus the dollar, 0.3 percent against the yen. The pound advanced against 15 of its 16 biggest peers as a report showed U.K. house prices rose for a ninth month.
Copper for three-month delivery on the London Metal Exchange advanced as much as 1.5 percent to $7,865 a metric ton, the highest level since April 16. Palladium, used in autocatalysts and jewelry, rose as high as $572.70 an ounce in London intraday trading. Oil was little changed near $85 a barrel in New York.
To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net
Last Updated: April 26, 2010 05:40 EDT
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