Global stocks rallied the most since May 2010 and commodities gained amid growing optimism that European leaders will tame the region’s debt crisis. Treasuries slid and the euro strengthened versus the dollar.
The MSCI All-Country World Index surged 3.6 percent as of 12:38 p.m. in New York as benchmark gauges in France and Germany climbed more than 5 percent. The Standard & Poor’s 500 Index rose 2.3 percent to 1,189.09 and the MSCI Emerging Markets Index surged the most since 2009. Silver rebounded after a three-day, 26 percent slide. The 30-year Treasury yield rose 10 basis points. Italian and Spanish 10-year bonds gained after debt auctions. The euro rose 0.6 percent to $1.3614.
U.S. Treasury Secretary Timothy F. Geithner predicted that European governments will use more force to resolve the region’s crisis after they heard the concerns of global finance officials during meetings inWashington last weekend. Opting for a government default in the euro region would be “voting for suicide,” European Central Bank Executive Board member Lorenzo Bini Smaghi said in an interview with the Australian Financial Review published today.
European leaders “finally get it,” Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian said in a radio interview withTom Keene and Ken Prewitt on “Bloomberg Surveillance.” Pimco is the world’s biggest manager of bond funds. “They recognize they have deep problems and they recognize they need to do something about it,” he said. “This was a very important wake-up call for Europe.”
Producers of energy and raw materials led gains among 10 groups in the S&P 500, rallying more than 3 percent. Hewlett- Packard Co., Walt Disney Co. and Caterpillar Inc. climbed at least 3.5 percent
U.S. Stocks
The S&P 500 added to yesterday’s 2.3 percent rally and has climbed 6.8 percent since falling as low as 1,114.22 on Sept. 22, the first time this month it slipped below its 2011 closing low of 1,119.46 on Aug. 8. The index is within 2.2 percent of erasing its 6.5 percent loss for last week, the biggest since the period ended Aug. 5, according to data compiled by Bloomberg.
Berkshire Hathaway Inc.’s Class B shares extended their two-day gain to 10 percent, the biggest advance since March 2009. Warren Buffett’s determination that his company’s shares are cheap enough to buy back may mean the S&P 500 is also a bargain. The company is authorized to repurchase stock as long as its price is less than 1.1 times book value, or assets minus liabilities. The level is 29 percent below Berkshire’s average of 1.55 since 2000, almost the same discount in the S&P 500, according to data compiled by Bloomberg.
Government Funding
The U.S. Senate reached a bipartisan deal on stopgap spending designed to avoid a government shutdown. Senators approved legislation yesterday, 79-12, to finance the government through Nov. 18, a measure including $2.65 billion for federal disaster assistance.
Stocks remained higher after U.S. consumer confidence rose less than forecast in September, as a measure of the difficulty of finding jobs rose to the highest in almost three decades. The Conference Board’s index increased to 45.4, from a revised 45.2 reading in August and below the 46 median forecast in a Bloomberg News survey of economists.
Home prices in the U.S. declined less than forecast in July from a year earlier, with the S&P/Case-Shiller index of property values in 20 cities dropping 4.1 percent from July 2010 compared with the median forecast of economists for a 4.4 percent decline.
The two-year Treasury note yield rose two basis points to 0.247 percent, the highest since Aug. 9, before the government sells $35 billion of the notes today.
Three-Day Rally
The Stoxx Europe 600 Index surged 4.4 percent and is up 7 percent after sliding to a two-year low on Sept. 22, capping the biggest three-day gain since May 2010. Allianz SE and Axa SA, Europe’s biggest insurers, climbed at least 8 percent. BNP Paribas SA and Deutsche Bank AG, the largest banks in France and Germany, rallied more than 12 percent.
The cost for European banks to convert euro payments into dollars, measured by the one-year cross-currency basis swap, declined to 67.2 basis points less than the euro interbank offered rate, from 70.5 basis points yesterday. The cost was 75 basis points under Euribor on Sept. 22, when the swap was the most expensive since December 2008.
‘Urgent Requirement’
“There has been no concrete alteration in the structure of the euro zone since the end of last week but the market has been willing to clutch at the idea that politicians at least recognize there is an urgent requirement for action,” Jane Foley, a senior foreign-exchange strategist at Rabobank International in London, said in a report today.
The cost of insuring against default on European financial debt fell for a third day. The Markit iTraxx Financial Index of credit-default swaps on senior debt of 25 banks and insurers declined 16.5 basis points to 259.5 and the subordinated gauge was 26 points lower at 498, according to JPMorgan Chase & Co. at 3 p.m. in London. A decline signals improved perceptions of credit quality.
Greek leaders appealed for support at home and abroad to avert default before key legislative votes. Prime Minister George Papandreou traveled to Berlin two days before lawmakers there were to ratify an overhaul of the euro rescue fund, pledging success in a struggle to restore budget balance. Finance Minister Evangelos Venizelos promised “superhuman” efforts hours before a vote in Athens on an unpopular property tax needed to avoid default.
Europe’s debt crisis is “starting to hurt growth everywhere, in countries as far away as China, Brazil and India, Korea,” Geithner said on ABC’s “World News With Diane Sawyer” program. “And they heard the same message from us they heard from everybody else, which is it’s time to move.”
The yield on the 10-year Spanish bond declined 11 basis points to 5.05 percent even after the government sold 3.22 billion euros ($4.3 billion) of three- and six-month bills at higher yields than previous auctions. Italy’s 10-year bond yield slid five basis points to 5.598 percent, according to Bloomberg generic rates, after an auction in that nation also resulted in higher borrowing costs.
‘Make No Mistake’
German Finance Minister Wolfgang Schaeuble declined to rule out further changes to the European rescue fund, saying during a panel discussion in Berlin that if we “have to enhance the EFSF” it will be done in the “most efficient way.” He also said investors should “make no mistake” that the aim of all euro-area nations is to defend the common currency.
The 17-nation European currency appreciated 0.9 percent against the yen after yesterday touching the lowest level in 10 years. The New Zealand dollar advanced 1.7 percent against the U.S. currency, with the Australian currency rising 1.2 percent.
Silver futures rose after falling 26 percent the past three days, and London-traded copper rebounded from a 17 percent slide in seven days. Oil advanced 4.3 percent to $83.65 a barrel in New York.
The MSCI Emerging Markets Index added 5.3 percent, the best rally since May 2009, after closing yesterday at a two-year low. South Korea’s Kospi Index (KOSPI) jumped 5 percent, the most since January 2009. Indonesia’s Jakarta Composite Index added 4.8 percent and benchmark indexes gained more than 3.3 percent in Poland, Hungary and the Czech Republic. The South African rand appreciated 3 percent against the dollar as commodity prices surged.
Israel’s TA-25 Index rose 1.4 percent after the central bank unexpectedly cut the benchmarkinterest rate for the first time in 2 1/2 years yesterday after the market closed.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
