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Global Stocks Set for Bull Market, Commodities Rise on Greece

Wednesday, 08 February 2012 11:08 AM

Global stocks rose, with the MSCI All-Country World Index set to enter a bull market, and commodities extended the longest rally this year as Greek leaders negotiated conditions of a second aid package.

The MSCI index climbed 0.4 percent at 10:38 a.m. in New York, extending gains to more than 20 percent from its closing low on Oct. 4. The Standard & Poor’s 500 Index was little changed. The S&P GSCI Index of commodities rose for a fourth straight day, reaching a six-month high. The yield on German 10- year bunds advanced two basis point. The euro was little changed near a two-month high versus the dollar.

Greek Prime Minister Lucas Papademos meets today with the nation’s political leaders to negotiate terms of a 130 billion- euro ($172 billion) rescue package, while the nation’s private creditors will meet in Paris tomorrow to discuss a debt- restructuring deal. The S&P 500 extended its 2012 gain to 7.2 percent after earnings beat estimates at about 68 percent of the 301 companies in the index that reported since Jan. 9.

“Be 100 percent in equities,” Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest money manager, said in a Bloomberg Television interview from Hong Kong today. “I don’t have a view that the world is going to fall apart, so you need to take on more risk. You need to overcome all this noise and there are great values in equities.”

Fear Index

While geo-political risks have risen, including Iran’s nuclear ambitions and Syria’s bloody crackdown, investors are taking their cue from policy makers who are driving down interest rates and flooding the world with cash to prop up their economies. The VIX, a measure of equity volatility known as the “fear index,” fell to 17.1 on Feb. 3, the lowest level since July, according to the Chicago Board Options Exchange.

The S&P 500 closed at a seven-month high yesterday, having extended its rebound from last year’s low in October to almost 23 percent.

Time Warner Inc. gained 2.2 percent today after reporting profit excluding some items of 94 cents a share, beating the 87 cent estimate in a Bloomberg survey of analysts. Ralph Lauren Corp. surged 11 percent after saying revenue for 2012 will jump 20 percent. Hartford Financial Services Group Inc. surged 8.8 percent. The company evaluated splitting the firm’s life insurance and property-casualty businesses and found “significant challenges,” Chief Executive Officer Liam McGee said.

The Stoxx Europe 600 Index advanced 0.2 percent, the first gain in three days, as banks and mining companies rallied. Reckitt Benckiser Group Plc climbed 3.2 percent as the maker of Nurofen painkillers and Dettol handwash said 2012 sales will increase at a faster pace than the industry.

Portuguese Banks

The Portugal PSI 20 Index jumped 3.1 percent for the biggest gain among 24 global developed markets. Banco Comercial Portugues SA, Banco Espirito Santo SA and Banco BPI SA all surged at least 15 percent.

The yield on the 10-year U.S. Treasury rose two basis points to 1.99 percent before the government auctions $24 billion of the securities, the second of three auctions this week totaling $72 billion.

The German five-year note yield increased two basis points to 0.93 percent. The government got bids for 5.87 billion euros ($7.78 billion) of five-year notes at an auction today, exceeding the maximum sales target of 4 billion euros, the Bundesbank said in a statement.

Spanish 10-year bonds slid, driving the yield 17 basis points higher as the nation plans to add to its outstanding supply of the securities due in January 2022, according to a banker involved in the transaction. The yield on the Greek 10- year bond slid 164 basis points, or 1.64 percentage points, to 32.52 percent.

Troika Meeting

Papademos last night held an unscheduled meeting with the so-called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, to put the final touches on terms required for rescue package.

The Institute of International Finance will hold a meeting tomorrow to go over technical matters so a debt swap can be implemented quickly if an accord between Greece and the troika is reached, said two people familiar with the matter who declined to be identified because talks are private.

Default Risk

The cost of insuring against a default on European government bonds rose from the lowest in three months, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments climbing 2.6 basis points to 321.

The euro was little changed against the dollar after rallying 1 percent yesterday to an almost two-month high of $1.3261, while New Zealand currency rose against 14 of its 16 most actively traded peers.

The S&P GSCI gauge of 24 commodities rose to the highest since Aug. 3. Copper gained 1 percent in New York after stockpiles of the metal fell to the lowest since September 2009, the London Metal Exchange said today.

Oil in New York climbed 0.9 percent to $99.28 a barrel. U.S. crude inventories fell 4.5 million barrels in the seven days ended Feb. 3, the first drop in three weeks, the American Petroleum Institute said yesterday.

The MSCI Emerging Markets Index rose 1.2 percent, heading for the highest close since Aug. 4. The Shanghai Composite Index advanced 2.4 percent and Taiwan’s Taiex Index jumped 2.1 percent. Russia’s Micex Index advanced for the first day this week, increasing 0.3 percent, as UBS AG upgraded the country’s equities to “overweight.”

The FTSE/JSE Africa All Share Index climbed 0.6 percent in Johannesburg as prices for industrial metals rose. The ISE National 100 Index gained 0.8 percent in Istanbul.

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Wednesday, 08 February 2012 11:08 AM
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