Stocks and commodities rose as Europe’s leaders reached a budget agreement, China’s trade expanded more than estimated and companies posted better-than- forecast earnings. Spanish bonds gained and the yen rallied.
The Standard & Poor’s 500 Index added 0.5% to 1,517.19, above its best closing level since November 2007, and the Stoxx Europe 600 Index gained 1.2%. Japan’s Nikkei 225 Stock Average sank 1.8% as Sony Corp. tumbled. The yen strengthened 0.9% to 92.81 per dollar, trimming its decline in the past three months to 14%. Spain’s 10-year bond yield dropped six basis points to 5.36% while U.S. Treasury rates were little changed. Zinc, gasoline and heating oil jumped more than 1.2% to lead commodity gains.
European Union leaders prepared the first-ever cuts in the bloc’s budget after Mario Draghi, the central bank president, said recent currency advances may slow price gains and the pace of expansion. China’s trade surplus was $29.15 billion in January, compared with a median projection for a $24.7 billion excess. Japanese Finance Minister Taro Aso said the currency had weakened faster than he anticipated.
“The trend’s been up all year and I don’t see anything changing that,” John Fox, a Cobleskill, New York-based fund manager at Fenimore Asset Management, which manages about $1.5 billion, said in a telephone interview. “The structural problems in Europe are not solved, but from the companies that report their geographic breakout, Europe is flattish. It’s not getting worse from an American corporation point of view.”
Market Leaders
Eight out of 10 groups in the S&P 500 rose, led by technology, consumer and health-care shares. LinkedIn Corp. surged 22%, the most since May 2011, after the online professional-networking service provider posted earnings that beat estimates. Activision Blizzard Inc. rose 10% after the largest U.S. video-game maker more than tripled fourth-quarter net income.
Trading volume for S&P 500 companies was 15% below the 30-day average for this time of day as the U.S. Northeast prepared for a storm forecast to drop snow by the foot. Exchanges in New York, which shut for two days in October when superstorm Sandy battered the city, had no plans to close early and said they were ready to use backup systems if needed.
“It’s business as usual,” NYSE Euronext spokesman Richard Adamonis said by phone. “We do also have our contingency plans in place.”
The S&P 500 has rallied about 6.3% in 2013 as U.S. lawmakers reached a budget compromise and earnings beat estimates at three-quarters of the companies that reported results so far. Financial companies have performed the best, beating results by 14%, data compiled by Bloomberg show.
‘Sustainable Recovery’
The benchmark equity gauge is about 3% below its record high reached in October 2007. The index erased a weekly decline today after falling earlier on renewed concerns about the euro-area debt crisis
“Confidence is emerging here,” James Paulsen, chief investment strategist at Minneapolis, Minnesota-based Wells Capital Management said in a television interview on “Bloomberg Surveillance with Tom Keene.” His firm oversees $332 billion in assets. “People are finally deciding that this looks more like a sustainable recovery.”
The rally has left the S&P 500 trading at the most expensive valuation in 15 months. The price-earnings ratio for the U.S. equity benchmark has increased 25% to 14.9 since October 2011. That’s still 10% cheaper than the average multiple of 16.6 from the past decade.
In Europe, the Stoxx 600 trimmed this week’s decline to 0.3% as a gauge of banking shares climbed 2.8%, the most in a month.
European Bonds
Ireland’s five-year note yields dropped nine basis points to 2.82% after the nation won an agreement to restructure the costs of rescuing the former Anglo Irish Bank Corp. Italian and Portuguese bonds also gained, along with U.K. and French debt, while Germany’s 10-year bund retreated.
EU leaders agreed to a seven-year budget that cuts spending for the first time, bowing to U.K. Prime Minister David Cameron’s insistence on thrift.
The deal was struck after 25 1/2 hours of talks in Brussels, according to a post on Twitter by EU President Herman Van Rompuy today. While he didn’t disclose a figure, the final draft blueprint for 2014-2020 included a spending ceiling of 960 billion euros ($1.3 trillion), down from an original proposal of 1.047 trillion euros and less than the 994 billion euros spent in the current budget cycle.
‘Prudent’ Cuts
“The European Union’s decision to cut the budget is a prudent one,” Richard Scrope, who helps manage the equivalent of about $160 million at Oriel Asset Management LLP in London, said in a phone interview. “The improvement in China’s data is a positive for European equities.”
Bwin.Party Digital Entertainment Plc and 888 Holdings Plc jumped more than 16% as New Jersey Governor Chris Christie said he would be willing to allow a 10-year trial period of online betting. TDC A/S fell 2 percent, the biggest retreat in 10 weeks, as the Danish phone company’s private- equity owners offered a 15% stake for sale.
Sony tumbled the most since November 2008 after Japan’s largest consumer-electronics maker reported an eighth straight quarterly loss. Nissan Motor Co. fell as the nation’s second- biggest carmaker posted third-quarter profit that fell short of analysts’ estimates.
Yen Watch
The yen gained as much as 1.6% against the dollar, the biggest advance since March 2011. The currency strengthened 1.1% versus the euro.
Japan’s currency is poised to strengthen more than 10% versus the dollar within six months, according to Tom DeMark, the creator of indicators to show turning points in securities.
Japanese Finance Minister Taro Aso said the pace of the yen’s weakening had been too fast, speaking a week before a meeting of global finance chiefs where Japan’s currency stance is forecast to be an issue.
Aso’s comment to reporters in Tokyo today came after he earlier told lawmakers the government hadn’t anticipated a rapid move to around 90 per dollar. The yen slumped 13% since mid-November in anticipation of monetary stimulus advocated by Shinzo Abe, who took office as prime minister in December.
The New Zealand dollar climbed 0.2% to 83.47 U.S. cents. The Australia rose 0.3% to $1.0314. The euro slipped 0.3% to $1.3360.
Commodities, Emerging Markets
The S&P GSCI gauge of 24 commodities climbed 0.7%. Zinc and copper advanced more than 1%, the first gain in four days for both. China is the biggest buyer of industrial metals.
Brent crude surged to a nine-month high in London after stronger-than-expected trade data from China signaled increased fuel demand in the world’s second-biggest consuming country.
West Texas Intermediate oil in New York fell, boosting the European benchmark grade’s premium for an eighth day. China’s exports rose 25% in January from a year earlier and crude imports increased to the highest level in eight months, customs figures showed. Goldman Sachs Group Inc. said oil markets will “remain tight” in the first quarter and may push prices above its forecasts.
Oil may fall next week as technical indicators signal that prices may have risen too quickly, a Bloomberg survey showed.
Crude Forecasts
Eighteen of 37 analysts, or 49%, forecast crude will decline through Feb. 15. Twelve respondents, or 32%, predicted an increase and seven forecast little change. Last week, 42% of analysts projected a gain.
The relative-strength index of front-month oil futures rose above 74 at settlement on Jan. 30, the highest level since Feb. 24, 2012. The RSI slipped to 56 today, the least since Dec. 24.
The MSCI Emerging Markets Index was little changed. The Shanghai Composite Index jumped 0.6%. Trading volume was 19% less than the 30-day average before markets close next week for the Lunar New Year. OAO Gazprom dragged the Micex Index down 0.4% after saying lower profit last year may lead to a cut in dividends. South Korea’s Kospi Index rallied 1%, rebounding from a 10-week low. India’s Sensex slid 0.5%, dropping for a seventh day in the longest losing streak since November 2011.
Brazil’s Bovespa index was little changed while the real currency touched a nine-month high as Finance Minister Guido Mantega signaled that the government would allow the currency to appreciate another 5% before the central bank intervened to stem gains.
The currency slipped 0.2% to 1.9705 per dollar at after rallying to 1.9511, the strongest intraday level since May 11. The real has gained 0.9% this week on speculation policy makers will let it rise to contain inflation.
