European Stocks Rise With Gold as Italian Government Bonds Rally
By Matthew Brown and Richard Frost - Apr 29, 2013
European stocks and the euro rose with Italian bonds as the country forms a new government amid optimism central banks will maintain monetary stimulus. The region’s corporate creditworthiness improved for a seventh day.
The Stoxx Europe 600 Index added 0.3 percent as of 9:29 a.m. in London, extending its biggest weekly increase in five months. Standard & Poor’s 500 Index futures also gained 0.3 percent. The euro strengthened 0.5 percent against the dollar. Yields on Italian 10-year bonds fell eight basis points to 3.98 percent. The Markit iTraxx Europe index of investment-grade company credit risk fell two basis points for the longest streak since September 2009. Gold climbed 0.8 percent.
Italian Prime Minister Enrico Letta may finish installing a government today nine weeks after voters rejected the country’s budget-cutting course. European Central Bank policymakers may cut interest rates this week, according to the majority of economists in a Bloomberg survey, while the Federal Reserve will consider renewing its commitment to bond-buying at a two-day meeting starting tomorrow. An index of pending home sales in the U.S. jumped 0.9 percent in March from a month earlier, according to a separate survey.
“We’re in a sweet spot for equities,” Steve Brice, chief investment strategist at Standard Chartered Plc in Singapore, said in a Bloomberg Television interview. “The authorities are very keen to keep the economy on a recovery track. They are likely to talk less about tightening” when the Fed concludes its policy meeting this week, he said.
ECB Rates
The Stoxx Europe 600 Index rose 3.7 percent last week, taking its advance for April to 0.7 percent. That would be its 11th straight monthly increase, the longest since 1997. The MSCI All-Country World Index advanced 0.3 percent today. Japanese and Chinese equity markets closed for holidays.
The Frankfurt-based ECB will lower its benchmark rate to a record 0.5 percent when central bankers meet in Bratislava May 2, according to the median of 69 economist estimates compiled by Bloomberg.
Aberdeen Asset Management Plc (ADN) climbed 5 percent after increasing its dividend. Swedish Match AB gained 3 percent after posting first-quarter profit that beat estimates. Bayer AG added 1 percent after saying it will buy Conceptus Inc. for about $1.1 billion. Balfour Beatty Plc (BBY) tumbled 11 percent as the U.K.’s largest construction company said 2013 operating profit will be less than it had projected earlier.
Euro Strength
The euro strengthened 0.4 percent to 1.3076 per dollar. The new Italian government’s pledges to dismantle parts of the budget-cutting project undertaken by ousted premier Mario Monti. German Finance Minister Wolfgang Schaeuble will travel to Spain today to unveil a plan aimed at spurring investment in Spanish companies.
The yen strengthened for a third day against the dollar, appreciating 0.2 percent to 97.84. It weakened 0.3 percent to 128.13 per euro. New Zealand’s dollar strengthened against all of its 16 major peers, climbing 0.6 percent to 85.32 U.S. cents.
Spain’s 10-year bond yield fell as much as eight basis points to 4.20 percent, the lowest since October 2010. Germany’s 10-year bund yield was little changed at 1.22 percent and the rate on 10-year Treasury notes was at 1.67 percent.
Italy plans to sell as much as 6 billion euros ($7.9 billion) of five- and 10-year securities today.
Gold Gains
Gold climbed 0.9 percent to $1,474.91 an ounce, paring its monthly decline to 7.8 percent. West Texas Intermediate crude added 0.2 percent to $93.14 a barrel.
At a time when politicians are squeezing budgets to cut borrowing, the bond market is clamoring for more debt, pushing yields on almost $20 trillion of government securities to less than 1 percent.
The average yield to maturity for the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index fell to a record low 1.34 percent last week from 3.28 percent five years ago. Even though the amount of bonds in the index has more than doubled to $23 trillion -- bigger than the gross domestic product of the U.S. and China combined -- countries from Germany to Rwanda sold debt in the past month at their lowest yields.
To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
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