U.S. Stocks, Euro Gain, Treasuries Drop

U.S. Stocks, Euro Gain, Treasuries Drop on M&A, Stress Tests

By Nikolaj Gammeltoft and Elizabeth Stanton

July 23 (Bloomberg) -- U.S. stocks rallied, sending benchmark indexes to one-month highs, after Genzyme Corp. received a takeover approach and General Electric Co. boosted its dividend. The euro appreciated after 84 of 91 European banks passed stress tests. Treasuries dropped.

The Standard & Poor’s 500 Index climbed 0.8 percent to 1,102.66 at 4 p.m. in New York, its first gain above 1,100 since June 22. Genzyme, the largest maker of medicines for genetic diseases, surged 15 percent and GE rose 3.3 percent. The euro strengthened above $1.29 after dropping 0.8 percent earlier. The 10-year Treasury yield increased five basis points to 2.99 percent. Copper rose for a fifth day, capping its best weekly gain since February, while oil fell from an 11-week high.

The S&P 500 drifted between gains and losses for most of the day before early afternoon reports that Sanofi-Aventis SA made a takeover approach for Genzyme bolstered optimism that a rebound in mergers and acquisitions is accelerating. GE helped the Dow Jones Industrial Average briefly erase its 2010 loss after lifting its payout by 20 percent.

“Companies are sitting on records amount of cash which are they either returning to shareholders or using for consolidation,” said Frank Ingarra, a Stamford, Connecticut- based money manager at Hennessy Advisors Inc., which oversees about $800 million. “The GE dividend news was positive and industry consolidation is good for shareholders.”

Takeover Growth

U.S. companies have been the targets of $397 billion in announced takeover offers so far this year, 11 percent more than at the same time last year, according to data compiled by Bloomberg. Drugmakers and medical companies have been the top acquirers, accounting for $37 billion in deals, the data show.

Verizon Communications Inc. jumped 3.8 percent to lead gains in the Dow after new phones helped the company add subscribers and top analysts’ earnings estimates. The Dow closed up 102.32 points, or 1 percent, to 10,424.62, trimming its decline for the year to less than 0.1 percent. The 30-stock gauge rallied 3.2 percent this week and the S&P 500 climbed 3.6 percent.

The S&P 500 has risen 7.8 percent since July 2 on optimism that corporate profit reports will signal a stabilizing economy. Of the 149 companies in the S&P 500 that have reported earnings since July 12, about 85 percent have beaten forecasts for earnings per share, according to Bloomberg data. Fewer than 70 percent have topped sales estimates, the data show.

Stress Tests

The Stoxx Europe 600 Index climbed 0.6 percent before the stress test results revealed that seven of 91 banks subject to the evaluations failed with a combined capital shortfall of 3.5 billion euros ($4.5 billion).

Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks have insufficient reserves to maintain a Tier 1 capital ratio of at least 6 percent in the event of a recession and sovereign-debt crisis, lenders and regulators said today.

The euro remained lower immediately after the release of the results before gaining 0.2 percent to $1.2912 later in the day.

The pound advanced 1.1 percent to $1.5431 as it strengthened against all 16 major counterparts. U.K. GDP rose 1.1 percent in the three months through June after increasing 0.3 percent in the previous quarter, the Office for National Statistics said in London today. Economists forecast a 0.6 percent gain, according to the median of 32 predictions in a Bloomberg News survey.

German Confidence

Germany’s DAX index increased 0.4 percent after the nation’s business confidence unexpectedly surged to a three-year high in July. The Ifo institute said its business climate index, based on a survey of 7,000 executives, jumped to 106.2, the highest since July 2007, from 101.8 in June. Economists had expected a decline to 101.5, according to the median of 41 forecasts in a Bloomberg News survey.

Hungary’s bonds and currency declined after Moody’s Investors Service put the nation’s debt rating under review for possible downgrade following the government’s failure to persuade the International Monetary Fund and EU that its deficit-reduction plans are sustainable.

The forint weakened for the first time in four days, falling more than 1.4 percent against the euro. The extra yield investors demand to own the Hungary’s foreign-currency debt over U.S. Treasuries rose 8 basis points to 3.52 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index.

Emerging Markets

The MSCI Emerging Markets Index gained for a fourth day, climbing 0.9 percent to the highest closing level since May 4. Technology companies including Chinese computer maker Lenovo Group Ltd. and Taiwan Semiconductor Manufacturing Co. led the advance.

Copper rallied as shrinking inventories signaled an improved outlook for demand. Copper futures for September delivery gained 2.05 cents, or 0.6 percent, to $3.185 a pound on the Comex in New York. That leaves the metal up 8.7 percent this week, the most since the week ended Feb. 19.

Crude oil fell from an 11-week high on speculation that Tropical Storm Bonnie won’t be strong enough to damage production platforms in the Gulf of Mexico. Crude for September delivery fell 32 cents, or 0.4 percent, to $78.98 a barrel in New York.