>>Stocks, U.S. Futures Rally on Economic Outlook; Yen Weakens, Bonds Decline
By David Merritt
June 3 (Bloomberg) -- Stocks rallied and U.S. index futures advanced on speculation reports on jobs and factory orders will indicate the world’s biggest economy is gathering strength. The yen weakened and government bonds fell.
The MSCI World Index, a gauge of equities in 24 developed nations, climbed 1.1 percent at 12:16 p.m. in London. Futures on the Standard & Poor’s 500 Index rose 0.3 percent after gaining as much as 0.7 percent. The yen slipped against all 16 of its most-traded counterparts. French 10-year notes led the decline in government bonds while the cost of protecting European corporate bonds from default sank the most in a week, traders of credit-default swaps said.
U.S. service industries probably expanded in May at the fastest pace in four years while factory orders rose, firings eased and private payrolls advanced, according to Bloomberg surveys of economists, a day before the Labor Department’s monthly jobs report which is forecast to show payrolls climbed by the most since 1983. The predictions boosted confidence after the MSCI World fell 12 percent from its April high on concern the European sovereign debt crisis would hold back growth around the world.
“The global economic recovery is continuing and most economic indicators are surprising to the upside,” said Tobias Merath, head of commodity research at Credit Suisse Group AG in Zurich. “The real economy is going rather well.”
BP, Valeo
More than 25 shares gained for each one that fell on the benchmark Stoxx Europe 600 Index, which rallied 1.9 percent, while the MSCI Emerging Markets Index advanced 2 percent. BP Plc, struggling to control its gushing oil well in the Gulf of Mexico, jumped 3.5 percent in London as investors speculated that the stock’s 30 percent plunge since April was overdone. The shares maintained gains even as Fitch Ratings cut its debt rating AA from AA+.
BHP Billiton Ltd., the world’s biggest mining company, increased 1.8 percent. Valeo SA, France’s second-largest auto- parts supplier, rallied 6.7 percent in Paris after giving a sales forecast.
The MSCI Asia Pacific Index jumped 2.6 percent, the biggest gain in six months. Nissan Motor Co. climbed 4.8 percent in Tokyo after its U.S. sales surged 24 percent in May from a year earlier. Canon Inc., which gets 78 percent of its revenue outside Japan, rose 3.4 percent as a weaker yen boosted its earnings outlook.
The gain in U.S. futures indicated the S&P may extend yesterday’s 2.6 percent rally. The Institute for Supply Management’s index of non-manufacturing businesses, which covers almost 90 percent of the economy, rose to 55.6 from 55.4 in April, according to the median forecast of 76 economists surveyed by Bloomberg News. The report is due at 10 a.m. in New York.
Jobless Claims
A report from ADP Employer Services due at 8:15 a.m. is forecast to show businesses added 70,000 jobs in May, the best performance since the recession began in December 2007, according to the survey median. Figures from the Labor Department at 8:30 a.m. may show the number of claims for jobless benefits fell for a second week, to 455,000, while a Commerce Department report at 10 a.m. may show factory orders rose 1.8 percent, according to the surveys.
Tomorrow’s Labor Department jobs report will show the U.S. economy added 515,000 jobs in May, the fifth straight month of gains, according to the median of 81 economists’ forecasts. The jump probably reflected a surge in government hiring of temporary help to conduct the census and a 175,000 increase in private employment.
Commodities Advance
Crude oil for July delivery added 0.6 percent to $73.27 a barrel in New York. Commodities also advanced after General Motors Co. and Ford Motor Co. posted U.S. sales increases in May that topped analysts’ estimates. Copper for delivery in three months rose 0.2 percent to $6,680 a metric ton on the London Metal Exchange, the first gain in four days. Cars use as much as 62 pounds of copper, according to the Copper Development Association. Palladium, used in catalytic converters, rose 0.4 percent to $459.7 an ounce.
The yen depreciated 0.6 percent to a two-week low against the dollar and also lost 0.6 percent against the euro. So-called commodity currencies rose, with the Australian dollar advancing 0.8 percent against the U.S. currency. The euro was little changed against the dollar after strengthening as much as 0.6 percent.
Government bonds slipped, with the yield on German bunds, the benchmark European debt security, rising five basis points to 2.70 percent. The yield on the French 10-year note advanced eight basis points to 3.05 percent. The 10-year U.S. Treasury yield rose three basis points to 3.37 percent.
Credit-default swaps on the Markit iTraxx Crossover Index of 50 mostly high-yield European companies fell 21.5 basis points to a two-week low of 554.5, the biggest decline since May 27, according to JPMorgan Chase & Co. The drop signals an improvement in investor perceptions of credit quality.
To contact the reporter on this story: David Merritt in London on dmerritt1@bloomberg.net
Last Updated: June 3, 2010 07:16 EDT
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