World stocks rise with Italian bonds
Stocks gained and Italian bonds rose for a second day as speculation grew Italy will form a coalition government and the European Central Bank will maintain stimulus efforts, while data fueled optimism in the US economy.
The Standard & Poor's 500 Index rose 0.3 per cent to 1,520.46 at 1:17 p.m., extending its three-day rally to 2.2 per cent. The Stoxx Europe 600 Index added 1 per cent and capped a ninth straight month of gains, the longest streak since 1997. The yield on 10-year Italian bonds fell eight basis points to 4.73 per cent, while the euro weakened against 13 of 16 major peers. Gold slipped for a second day. US Treasuries rose.
Italy is headed for a coalition government as bondholders pressure Pier Luigi Bersani and Silvio Berlusconi to set aside their rivalries, said Finance Undersecretary Gianfranco Polillo. While the ECB's balance sheet may shrink, policy makers are "far" from considering an exit from monetary stimulus, Draghi said yesterday. The US economy erased a previously estimated contraction, while another report indicated fewer Americans filed for jobless claims last week.
"There is speculation that Italy will form a coalition and the market is taking that as positive news," said Martin Munksgaard, a bond trader at Danske Bank A/S in Copenhagen. "It might not be a perfect situation but it's far better than the alternative. Berlusconi might not be as big a threat as the market had feared, and European leaders will continue to put pressure on Italy to reform."
US stocks rose yesterday, leaving the Dow Jones Industrial Average 0.6 per cent short of its October 2007 record.
Limited Brands Inc., the owner of Victoria's Secret chain, rose 4.3 per cent after profit jumped. J.C. Penney Co. tumbled 15 per cent after saying its net loss widened to $US552 million. Sears Holdings Corp., the retailer controlled by hedge-fund manager Edward Lampert, slumped 5.6 per cent after posting a fourth- quarter loss that was larger than it forecast.
Gross domestic product in the US grew at a 0.1 per cent annual rate, up from a previously estimated 0.1 per cent drop, revised figures from the Commerce Department showed. Jobless claims decreased by 22,000 to 344,000 in the week ended Feb. 23, the Labor Department said. The median forecast of 44 economists surveyed by Bloomberg called for 360,000 applications.
Treasuries rose for the first time in three days amid speculation the start of $US85 billion in automatic federal spending reductions tomorrow will slow the recovery in the world's biggest economy.
The yield on 10-year notes fell two basis points to 1.89 per cent. The across-the-board cuts due to start in March may lower gross domestic product by 0.6 per centage point and cost 750,000 jobs by the end of 2013, the Congressional Budget Office said this month.
The Stoxx 600 extended yesterday's 0.9 per cent advance for the biggest two-day gain since the beginning of the year. Bayer AG climbed 2.7 per cent to a one-month high after the German chemical maker forecast increasing sales this year. Royal Bank of Scotland Group Plc slid 6.6 per cent as Britain's biggest taxpayer-owned lender posted a wider full-year loss.
Italy's 10-year bond yield has dropped 16 basis points in the past two days after jumping 41 basis points on Feb. 26, following the inconclusive election results. The securities are headed for their first monthly decline since July.
Spain's 10-year bond yield fell 14 basis points today to 5.10 per cent, compared with the 5.15 per cent level at the close on Feb. 22. The yield on benchmark German bunds was little changed at 1.45 per cent.
The yen was set for a fifth monthly decline against the dollar, the longest run since August 2008. It weakened 0.2 per cent 92.36 per dollar today after Prime Minister Shinzo Abe nominated Asian Development Bank President Haruhiko Kuroda to become Bank of Japan governor, raising the prospect of more stimulus this year. Abe also named economics professor Kikuo Iwata and BOJ official Hiroshi Nakaso as deputy governor candidates.
The S&P GSCI gauge of 24 commodities added 0.3 per cent, set for monthly drop of 3.5 per cent, the most since October. Gold slipped 1 per cent to $US1,580.60 an ounce. West Texas Intermediate oil was little changed at $US92.76 a barrel, down about 5 per cent this month. Aluminum led industrial metals lower, losing 0.8 per cent.
The MSCI Emerging Markets Index gained for a second day, climbing 0.7 per cent. The Shanghai Composite Index advanced 2.3 per cent as property developers rallied after China Vanke Co.'s profit beat analyst estimates. Benchmark gauges in Hungary, the Czech Republic, South Africa, Turkey, the Philippines, Indonesia and South Korea jumped at least 1 per cent.
India's Sensex slid 1.5 per cent, with trading volume 144 per cent higher than the 30-day average, as Finance Minister Palaniappan Chidambaram signaled record borrowing in his budget speech today.