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Tuesday, May 31, 2011

Stocks, Euro Gain on Greek Aid Optimism as Default Risk Drops

Stocks, Euro Gain on Greek Aid Optimism as Default Risk Drops : Stocks rose around the world, paring their worst monthly performance since August, and the euro strengthened amid speculation nations will pledge more aid to Greece. The cost of insuring bank debt fell the most in six weeks, while U.S. index futures and commodities gained.

The MSCI World (MXWO) Index advanced 0.7 percent at 6:50 a.m. in New York, paring this month’s decline to 3.2 percent. Standard & Poor’s 500 Index futures rallied 1 percent. The euro appreciated to a three-week high against the dollar, and the yen fell against its major peers. The yield on the 10-year German bund climbed seven basis points, while Greek yields slid 30 basis points. Copper increased for a second day and wheat dropped.

European Union leaders will decide on a new aid package for Greece by the end of next month, Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said yesterday in Paris. More than $1.8 trillion has been erased from the value of stocks worldwide this month as evidence mounted that the U.S. economic recovery is slowing and EU officials struggled to contain the region’s debt crisis.

“There’s a degree of confidence that cooler heads will prevail and the next round of assistance will be forthcoming” for Greece, said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp.

The Stoxx Europe 600 Index climbed 0.9 percent as eight shares rose for every one that declined and all 19 industry groups advanced. Alpha Bank SA and EFG Eurobank Ergasias SA led a rally in Greek banks, surging more than 5 percent. BASF SE (BAS), the world’s biggest chemicals maker, jumped 3.8 percent.

Home Prices

The increase in S&P 500 futures indicated the benchmark gauge for U.S. equities will rise for a fourth day. U.S. markets were closed yesterday for the Memorial Day holiday. A report from S&P/Case-Shiller today may show U.S. home prices slumped in March by the most in 16 months, according to a Bloomberg survey of economists. Separate figures will probably show manufacturing slowed in May, while consumer confidence rose.

The euro climbed 0.8 percent against the dollar and 1.6 percent versus the yen. Japan’s currency weakened against all 16 of its most-traded counterparts after Moody’s Investors Service signaled it may cut the country’s credit rating. The Dollar Index, which tracks the currency against those of six U.S. trading partners, slid 0.5 percent, falling to the lowest since May 11. The New Zealand dollar gained as much as 1.2 percent to a record 82.64 U.S. cents.

Default Risk

Greek 10-year bonds yielded 1,308 basis points more than their German equivalents, down from 1,345 yesterday. Credit- default swaps on Greek government debt dropped 54 basis points to 1,396 basis points. Markit iTraxx Financial Index of credit- default swaps linked to European banks and insurers slipped five basis points.

EU officials have ruled out a “total restructuring” of the nation’s debt, Juncker said yesterday. Germany may stop demanding an early rescheduling of bonds for Greece so the nation can get a new package of loans, the Wall Street Journal reported, citing unidentified people.

Copper gained 0.5 percent in London, after climbing 2 percent on May 27. Wheat fell 2.3 percent in Chicago after Russia said it will allow grain shipments to resume and as rains may alleviate drought in French growing areas. The Standard & Poor’s GSCI index of 24 commodities rose 1.1 percent, led by a 3 percent jump in cotton and 2.6 percent advance in natural gas.

Crude for July delivery climbed 1.8 percent to $102.39 a barrel on the New York Mercantile Exchange after a leak shut a pipeline carrying crude to the largest U.S. storage hub. source www.bloomberg.com...

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