Euro Strengthens, U.S. Stocks Gain on Aid Plan for Greece
By Elizabeth Stanton and Justin Carrigan
April 12 (Bloomberg) -- The euro strengthened the most in seven months against the dollar, U.S. stocks rose and the cost of insuring against a default by Greece dropped by the most on record after the nation got an international aid pledge.
The euro appreciated versus all of its 16 most-traded counterparts at 11:35 a.m. in New York. The cost of insuring Greek bonds against default tumbled 62 basis points to 364, according to CMA DataVision prices for credit-default swaps. The MSCI World Index of 23 developed nations’ stocks rose 0.5 percent and the Standard & Poor’s 500 Index climbed 0.2 percent.
Greece got a promise of as much as 45 billion euros ($61 billion) in loans yesterday from the euro-region and International Monetary Fund to help cover its financing needs and avoid a default. The agreement may remove a concern that helped drive the euro 4.8 percent lower against the dollar this year even as signs emerged that global economic growth is accelerating. The Dow Jones Industrial Average topped 11,000 before Alcoa Inc. starts the first-quarter earnings season.
“The Greek situation seems a bit closer to resolution, which has increased risk appetite,” said Marshall Front, chairman of Front Barnett Associates LLC in Chicago, which manages $500 million.
The S&P 500 remained at its highest level since September 2008. Combined profit for S&P 500 companies will increase 30 percent from a year earlier, according to analyst estimates compiled by Bloomberg. Intel Corp., JPMorgan Chase & Co., Bank of America and General Electric Co. also post results this week.
Takeovers and Speculation
Takeovers and mergers helped boost U.S. stocks. Palm Inc. surged 20 percent as the creator of the Pre smartphone was said to be seeking bids for the company. DynCorp International Inc. rallied 49 percent following an agreement to be bought by Cerberus Capital Management LP. Mirant Corp. and RRI Energy Inc. jumped more than 12 percent on plans to combine.
The euro rose as much as 1.4 percent to $1.3692, its strongest level in more than three weeks. The Dollar Index, which tracks the U.S. currency against those of six major trading partners, fell 0.8 percent to the lowest level since March 19.
Greek bonds jumped, with the yield on the benchmark two- year note tumbling 87 basis points to 6 percent and lost as much as 147 basis points, the biggest decline since the euro was introduced in 1999. The yield premium, or spread, investors demand to hold the government 10-year debt instead of similar- maturity German securities, the benchmark bonds for the region, narrowed by 50 basis points.
Greece’s ASE Index surged 3.5 percent, led by National Bank of Greece SA, the nation’s biggest lender, which rallied 5.2 percent in Athens. UBS AG, Switzerland’s largest bank, surged 3.5 percent in Zurich after reporting the highest quarterly earnings in almost three years.
Default Swaps
The cost to protect against default on corporate bonds fell around the world as a rescue plan to stem Greece’s budget woes eased concern of a wider debt crisis. The Markit iTraxx Crossover Index of swaps on 50 European companies dropped 8 basis points to 410, the lowest since March 17, JPMorgan Chase & Co. prices show.
Greece’s bailout spurred gains in eastern European markets, with Poland’s WIG20 Index of shares climbing 1 percent even after the weekend plane crash that killed Poland’s president and central bank chief.
“Markets have very much been determined by the news out of Greece over the weekend,” said Sean Maloney, a fixed-income strategist at Nomura International Plc in London. “The overall level of risk has come down. We’re looking at a better scenario than we were last Friday.”
Emerging Markets
The MSCI Emerging Markets Index fell 0.1 percent, led by a 3.6 percent slump in Thailand’s main index after a clash between soldiers and protesters left as many as 21 people dead.
German government bonds declined as the agreement to lend to Greece at below-market interest rates reduced the appeal of the securities as a haven. The 10-year bund yield rose 2 basis points to 3.18 percent after earlier climbing as high as 3.22 percent, the most since Feb. 23, according to data compiled by Bloomberg.
The 10-year Treasury yield slipped 0.3 percentage point to 3.85 percent. Treasury 30-year bonds gained for a second day as yields close to the highest level since October 2007 attracted value-conscious investors. The 30-year yield slipped 2 basis points to 4.72 percent.
European Stocks
Gains in Europe were limited as basic resources shares fell. Xstrata Plc, the biggest exporter of power station coal, slipped 1 percent in London after the Australian newspaper reported the company may bid A$4 billion ($3.7 billion) for MacArthur Coal Ltd. Antofagasta Plc, which will produce almost 10 percent of Chile’s copper this year, slipped 1.5 percent after analysts at Exane BNP Paribas and Citigroup Inc. downgraded the shares.
The MSCI Asia Pacific Index advanced 0.2 percent. Billabong International Ltd., which gets almost a quarter of its revenue in Europe, increased 3.4 percent in Sydney. Nintendo Co., which receives about 34 percent of revenue from Europe, jumped 4.3 percent in Osaka as the euro strengthened against the yen.
Crude oil for May delivery slipped 0.4 percent to $84.60 a barrel on the New York Mercantile Exchange. Copper for delivery in three months gained 0.2 percent to $7,940 a metric ton on the London Metal Exchange.
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