BL: Stocks, Oil Rise on Economy; Emerging Market Currencies Gain
By Rita Nazareth and Gavin Serkin
April 29 (Bloomberg) -- Stocks rallied the most in almost two months as companies from Motorola Inc. to Unilever NV posted better-than-estimated profit and European leaders moved closer to rescuing Greece. Higher-yielding currencies gained after the Federal Reserve pledged to keep interest rates at a record low.
The Standard & Poor’s 500 Index climbed 1.3 percent and the MSCI World Index of stocks in 23 developed nations gained 1.2 percent at 11 a.m. in New York, the most since March 5 for both. The ASE Index jumped 7.1 percent in Athens, the biggest rally this year, as the European Union said it’s close to agreeing on a bailout to prevent a Greek default. The extra yield investors demand to hold Greek 10-year bonds instead of benchmark German bunds narrowed 97 basis points to 596 basis points. South Africa’s rand rose 0.9 percent against the dollar, while oil and tin led gains in commodities.
Investor confidence is recovering after almost three- quarters of companies in the MSCI World Index and S&P 500 that reported earnings topped analysts’ estimates. European confidence in the economic outlook improved to the highest in more than two years, while U.S. jobless claims fell to a one- month low and German unemployment plunged. Fed policy makers restated a pledge yesterday to keep interest rates near zero for an extended period even as the labor market begins to improve.
‘Great So Far’
“The earnings season has been great so far,” said Hayes Miller, a Boston-based money manager at Baring Asset Management Inc., which oversees $46.1 billion. “That’s a good indication for the economy. 2010 looks pretty solid right now. In Europe, things are still on the table.”
The S&P 500 has recovered three-quarters of its 2.3 percent plunge on April 27 when S&P cut Greece’s credit rating to junk and lowered Portugal by two steps. With the first-quarter earnings season past the half-way point, S&P 500 companies have beaten analysts’ estimates by an average of 17 percent on a per- share basis, according to data compiled by Bloomberg.
Motorola, the largest U.S. mobile-phone maker, rallied 4.3 percent after forecasting second-quarter earnings that topped analysts’ estimates amid growing demand for models like the Droid. Aetna Inc. and Starwood Hotels & Resorts Worldwide Inc. were also among companies that climbed after reporting better- than-estimated earnings.
Initial jobless claims fell by 11,000 to 448,000 in the week ended April 24, in line with the median forecast of economists surveyed by Bloomberg News and the lowest level in a month, Labor Department figures showed. The number of people receiving unemployment insurance and those getting extended payments decreased.
Global Advance
The Stoxx Europe 600 Index rallied 1.5 percent, with food and beverage companies leading gains. Unilever, the world’s second-largest food and detergent company, rallied 3.7 percent in Amsterdam after saying profit rose 33 percent. Pernod Ricard SA, the maker of Absolut vodka, climbed 2.9 percent in Paris after raising its forecast for full-year earnings. Siemens AG, Europe’s largest engineering company, advanced 1.7 percent in Frankfurt after profit topped estimates.
The rand and Brazilian real rose at least 0.9 percent to lead gains among 14 of 16 major currencies against the dollar as investors bought currencies in countries with higher interest rates. Only the yen and Taiwanese dollar retreated. Brighter economic prospects in Asia and widening interest-rate differentials are likely to attract more capital, while bets for exchange-rate appreciation in the region may boost so-called carry trades, the IMF said in a report today.
Euro Rebounds
The euro strengthened 0.2 percent to $1.3249, after trading at $1.3115 yesterday, the lowest level in a year. Investors demanded an extra 5.96 percentage points in yield to buy Greece’s 10-year bonds rather than benchmark German bunds, after the difference in yield, or spread, widened to more than 8 percentage points yesterday.
Greek Prime Minister George Papandreou began trying to persuade labor unions to accept further austerity measures as the nation tried to qualify for a rescue package worth as much as 120 billion euros ($159 billion).
German Chancellor Angela Merkel said yesterday that the “stability of the euro zone” was at stake if a loan package for Greece can’t be delivered quickly. President Nicolas Sarkozy said France is “determined” to support the euro and Greece, while European Union Economic and Monetary Affairs Commissioner Olli Rehn today told reporters in Brussels that he is confident discussions on the aid package for Greece will conclude “in the next days.”
Default Swaps
The cost of insuring against default on European corporate bonds fell for the first time in four days. The Markit iTraxx Crossover Index of credit-default swaps on 50 mostly high-yield companies fell 18 basis points to 438 as of 3:02 p.m. in London, after yesterday climbing to the highest level since March 22, according to Markit Group Ltd. Contracts tied to Greece’s government debt dropped 97.5 basis points to 657, CMA DataVision prices show.
Germany’s DAX Index jumped 1 percent as unemployment declined at the fastest pace in more than two years in April, the Nuremberg-based Federal Labor Agency said today. An index of executive and consumer sentiment in the 16 euro nations rose to 100.6 in April from a revised 97.9 in March, the European Commission in Brussels said today.
Spanish 10-year bonds rose, cutting the yield by 6 basis points to 4.05 percent. The Italian 10-year bond yield fell 4 basis points to 4.06 percent even as the nation sold 8 billion euros ($11 billion) of securities due in 2012, 2017 and 2020.
Tin for delivery in three months added 2.3 percent to $18,415 a metric ton on the London Metal Exchange, the steepest advance since February. Aluminum gained 1 percent, while gold fluctuated and crude oil added 2.6 percent to $85.38 a barrel in New York.
To contact the reporters for this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net.
Last Updated: April 29, 2010 11:05 EDT
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