US stocks gain while Italy tumbles
Stocks rose as metal prices rallied after economic data in China beat estimates and investors weighed prospects for a US budget deal. Italy's stocks and bonds slid as the prime minister said he would resign.
The Standard & Poor's 500 Index rose 0.1 per cent at 1:37 p.m. and the MSCI All-Country World Index added 0.1 per cent, erasing a 0.2 per cent retreat. Italy's FTSE MIB sank the most in a month and the government's 10-year bond yield had the biggest increase since August. Lead, nickel, zinc, aluminum and copper rallied at least 1.2 per cent to lead commodities higher.
China's factory output jumped 10.1 per cent in November and retail sales rose 14.9 per cent, reports showed yesterday. Italian Prime Minister Mario Monti said that while he lost support and will resign, he's confident elections will result in a "highly responsible, EU-oriented government." US lawmakers from both parties are leaving rhetorical room for a split-the- difference budget agreement to avoid the fiscal cliff.
"China hit that trough and is starting to see an acceleration of growth," Tom Wirth, who helps manage $US1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a phone interview. "As far as our market goes, I don't think there's anything out there right now. It's waiting on the politicians."
Leaders in the US need to agree on a budget to prevent more than $US600 billion of automatic tax increases and spending cuts from coming into effect next year. US President Barack Obama and House Speaker John Boehner met one-on-one yesterday at the White House. Representatives for the two said in statements afterward that "the lines of communication remain open."
Hewlett-Packard Co., Cisco Systems Inc. and Microsoft Corp. rose more than 1 per cent to help lead gains in the Dow Jones Industrial Average. McDonald's Corp., the largest restaurant chain, added 1.3 per cent as its November sales rose 2.4 per cent globally.
American International Group Inc. slid 2.4 per cent after the insurer said superstorm Sandy will cost the company about $US1.3 billion. Priceline.com Inc. retreated 5.1 per cent after the online travel service was downgraded to hold from buy at Deutsche Bank AG.
Companies in the S&P 500 are paying less in interest on debt than any time in at least a decade, leaving investors more dependent on economic growth and corporate spending for equity gains in 2013.
Constituents of the benchmark gauge for American stocks such as Exxon Mobil Corp. and Walt Disney Co. cut interest expenses to 2.39 per cent of sales in the 12 months ended Sept. 30 on average, the lowest level since at least 2002, according to data compiled by Bloomberg and Strategas Research Partners. With borrowing expenses at record lows, executives are finding it harder to squeeze costs, causing profit margins to contract for the first time since 2009.
Treasuries pared early gains, with the yield on 10-year notes little changed at 1.62 per cent. The dollar weakened against nine of its 16 major peers, with the Dollar Index slipping 0.1 per cent.
The Stoxx Europe 600 Index rose 0.1 per cent, erasing an earlier 0.6 per cent loss to close at its highest level since May 2011 as health-care and commodity companies led gains. The FTSE MIB tumbled 2.2 per cent in Milan. UniCredit SpA, Italy's biggest bank, and Intesa Sanpaolo SpA, the second-largest, sank more than 5 per cent each.
STMicroelectronics NV climbed 4.4 per cent as the European chipmaker struggling with competition from Asia said it will sell its stake in the ST-Ericsson joint venture as part of a strategy to make the company more profitable.
Italy's 10-year bond yield jumped 29 basis points to 4.82 per cent, the biggest increase since Aug. 2. The cost of insuring Italy's debt jumped, with credit-default swaps climbing 39 basis points to 292, the highest since Nov. 19. The yield on Spain's 10-year debt climbed 11 basis points to 5.56 per cent.
Prime Minister Monti said investors shouldn't expect the imminent demise of his government to lead to a political vacuum that will fuel market turmoil in Italy. Monti's predecessor, Silvio Berlusconi, announced he will run for the premiership to roll back Monti's budget rigor.
German 10-year rates were up one basis point at 1.31 per cent. The Markit iTraxx Crossover index of swaps linked to 50 mostly high-yield companies added two basis points to 481.
Industrial metals led gains in the S&P GSCI gauge of raw materials, while declines in natural gas and agricultural commodities left the gauge's little changed. Gold for immediate delivery climbed for a third day, gaining 0.5 per cent to $US1,712.60 an ounce.
Oil rose from the lowest level in three weeks in New York, climbing 0.3 per cent to $US86.17 a barrel, while Brent crude advanced 0.8 per cent to $US107.87 as OPEC ministers began gathering in Vienna. US natural gas futures fell 3 per cent on forecasts of moderate weather next week that may limit heating- fuel demand.
The MSCI Emerging Markets Index rose 0.5 per cent to a seven-month high. The Shanghai Composite Index jumped 1.1 per cent, with trading volume 86 per cent above the 30-day average. The Hang Seng China Enterprises Index of mainland companies climbed 0.7 per cent and Russia's Micex rose 0.5 per cent. Brazil's Bovespa gauge added 0.8 per cent. The Egyptian pound weakened 0.3 per cent to an eight-year low as opponents of President Mohamed Mursi vowed to keep up protests against a draft constitution.