Stocks and U.S. equity futures gained as rating companies affirmed America’s credit ratings, offsetting concern that European leaders are running out of options to solve the debt crisis. Spanish bonds fell after borrowing costs more than doubled at an auction.
The Stoxx Europe 600 Index increased 0.4 percent at 7:25 a.m. in New York, after earlier climbing 1 percent. Standard & Poor’s 500 futures added 0.4 percent. Spain’s two-year note yield rose 14 basis points to 5.73 percent. Copper snapped a three-day decline and gold rebounded from a one-month low.
Standard & Poor’s and Moody’s Investors Service kept the U.S.’s credit rating unchanged after Congress failed to reach an agreement, setting the stage for $1.2 trillion in automatic spending cuts. Michael Meister, finance spokesman for German Chancellor Angela Merkel’s Christian Democratic party, said “we haven’t any new bazooka to pull out of the bag.” About $3.3 trillion has been wiped off global equity values this month amid concern Europe’s credit crisis is worsening.
“When you look at valuation measures for global equities, they’re all running well below historical averages,” Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., said in a Bloomberg Television interview. “Very tough economic conditions are already priced in, probably something approaching a global recession.”
More than two shares advanced for every one that declined in the Stoxx 600. Antofagasta Plc and Xstrata Plc led a rally in mining companies, both climbing more than 1 percent. Thomas Cook Group Plc tumbled 67 percent as Europe’s second-largest tour operator said it held talks with banks on financing.
The S&P 500 slid to its lowest level since Oct. 7 yesterday. Hewlett-Packard Co. fell 1.6 percent in pre-market trading after forecasting first-quarter profit and fiscal 2012 earnings that missedanalysts’ estimates. (HPQ) Campbell Soup Co. publishes its earnings before U.S. equity markets open today. A Commerce Department report due at 8:30 a.m. in Washington will probably reaffirm that the world’s largest economy grew at a 2.5 percent pace in the third quarter.
The yield on Spain’s 10-year bond rose five basis points after the government sold three-month bills at a yield of 5.11 percent, more than double the 2.292 percent yield the last time the debt was offered on Oct. 25. It also offered six-month bills at an average yield of 5.227 percent, compared with 3.302 percent last month.
The extra yield investors demand to hold Belgian 10-year bonds instead of benchmark German bunds increased 12 basis points after Belgium’s coalition talks were suspended as Elio Di Rupo offered to resign from leading the negotiations.
Money Markets Ease
The Greek two-year note yield climbed 62 basis points to 112.68 percent, with the price tumbling to about 29 percent of face value.
The cost for European banks to fund in the U.S. currency fell for the first day in six, declining from the highest level since December 2008. The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 134 basis points below the euro interbank offered rate, from 139 yesterday.
The five-year Treasury yield rose one basis point to 0.91 percent before the government sells $35 billion of the securities, the second of three auctions this week totaling $99 billion. A two-year note sale attracted the highest demand ever yesterday as investors sought the safest assets.
The euro appreciated 0.4 percent to $1.3546, after climbing as much as 0.6 percent. The Swiss franc strengthened 0.5 percent against the dollar and 0.2 percent versus the euro, rising for the third consecutive day. The yen depreciated against most of its most actively traded peers monitored by Bloomberg.
The MSCI Emerging Markets Index (MXEF) rose 0.5 percent. Russia’s Micex jumped 2 percent as commodities gained, and Poland’s WIG20 Index climbed 1.8 percent. The BSE India Sensitive Index increased 0.8 percent, snapping an eight-day loss. Egypt’s EGX 100 Index declined 5.5 percent, the most in almost two months, after the government offered to quit and fighting between protesters and security forces continued.
Copper rose 1.7 percent in London, following a three-day, 5.4 percent slump. Tin added 2 percent and zinc gained 1.1 percent. Gold rose 1.1 percent to $1,695.88 an ounce after falling 2.7 percent yesterday, the most in almost two months. Oil rallied 1.4 percent to $98.24 a barrel in New York, the first increase in four days.