Feb. 5 (Bloomberg) -- U.S. stocks rose, with the Dow Jones Industrial Average
erasing a 167-point drop in the final hour of trading, on speculation the
European Union may propose a solution for Greece’s budget deficit. Oil, gold
and copper rebounded, and the dollar pared its gain.
The Dow rose 10.05 points to 10,012.23 at 4 p.m. in New York, and the Standard
& Poor’s 500 Index rallied 0.3 percent after plunging 1.8 percent in what would
have been the biggest two-day slump since March. The MSCI World Index cut its
drop in half to 1 percent because of the recovery in U.S. stocks. Oil pared its
loss to 1.8 percent and gold and copper climbed at least 0.3 percent in
electronic trading after the close of commodities exchanges. The U.S. Dollar
Index gained 0.5 percent.
Stocks and commodities had plunged around the world earlier on growing concern
European nations will default on their debt. The recovery by U.S. equities
showed confidence among investors that a solution will be reached in Europe.
The retreat in American shares had been limited after the nation’s jobless rate
unexpectedly fell to a five-month low of 9.7 percent.
“The markets are expecting a positive announcement out of the European Union
this weekend as it relates to Greece and their debt,” said John Brady,
Chicago-based senior vice president with the interest rates product group at MF
Global Ltd. “Although it’s unclear whether Greece will be bailed out, some in
the market think the EU has no choice.”
Investors have bet that Portugal, Spain and Greece will struggle to control
their budget deficits, driving money into assets they consider safer.
‘Very Nervous’
European Central Bank President Jean-Claude Trichet has struggled to convince
investors the euro region shouldn’t be punished for Greece’s budget problems.
As Greece tries to control a record deficit and stem a slide in its bonds,
Trichet said the economy of the 16-nation euro area is solid and its budget
shortfall will probably be smaller than those of the U.S. and Japan this year.
The comments yesterday didn’t stop Spanish and Portuguese stocks from dropping
or the euro from tumbling to a nine-month low against the dollar.
“People are still very nervous about Spain, Portugal and Greece,” said David
Rovelli, managing director of U.S. equity trading at Canaccord Adams Inc. in
New York. “If one goes belly up and can’t raise money, it’s going to spread
across Europe. It’s infectious.”
Getting Caught
Cisco Systems Inc., Intel Corp. and Alcoa Inc. climbed more than 2 percent for
the biggest gains in the Dow average after a report at 3 p.m. in New York
showed consumers paid down less of their debt than economists estimated.
Freeport-McMoRan Copper & Gold Inc. led commodity producers to the biggest
advance among 10 industries in the S&P 500. Despite today’s gain, the S&P 500
fell for a fourth straight week, the longest slump since July.
“People don’t want to be short over the weekend if the EU says it will bail
out Greece and Spain,” said Neil Massa, an equity trader at MFC Investment
Global Management Co. “A lot of investors were short, and they’re closing their
positions because they don’t want to get caught if something happens over the
weekend.”
European stocks declined for a third day, extending the biggest weekly slump
in 11 months, on concern efforts by Greece, Portugal and Spain to reduce their
deficits will hurt the region’s economic recovery. The Dow Jones Stoxx 600
Index decreased 2.2 percent.
ICAP, BHP Fall
ICAP Plc, the world’s largest broker of transactions between banks, sank the
most in 16 months in London trading after cutting its profit forecast. BHP
Billiton Ltd., the world’s biggest mining company, and Rio Tinto Group led
commodity producers lower on the earlier slump in metals.
Emerging-market stocks retreated. Brazil’s Bovespa stock index lost 1.8
percent, extending its drop during the past month to 11 percent. Benchmarks for
Taiwan, Turkey and South Africa retreated at least 2 percent.
BES Investimento do Brasil scrapped an international bond offering of as much
as $350 million, capping a week of canceled sales from India to Korea after a
global market rout pushed up emerging-market borrowing costs.
U.S. deals were completed. Kraft Foods Inc., the maker of Oreo cookies, raised
$9.5 billion yesterday for its takeover of Cadbury Plc, while Warren Buffett’s
Berkshire Hathaway Inc. sold $8 billion of notes for its buyout of railroad
company Burlington Northern Santa Fe Corp., which he called an “all-in wager”
on the U.S. economy.
Rebound With Stocks
Oil lost 2.7 percent to $71.19 a barrel as of the close of exchange trading in
New York. Gold futures slipped 1 percent to $1,052.80 an ounce at the close,
while copper slipped to a three-month low. All three commodities rebounded in
tandem with U.S. stocks.
The euro fell to an almost one-year low against the yen and to the weakest
level in eight months versus the dollar on concern budget deficits in Greece
and other European nations will hamper the region’s growth.
The euro declined for a third day, dropping 0.3 percent to $1.3678, from
$1.3723 yesterday. The shared currency touched $1.3595, the least since May 20.
Against the yen, the euro dropped 0.1 percent to 122.09, after falling 3.4
percent yesterday, the biggest drop since October 2008. It is at the lowest
level since Feb. 24, 2009. The dollar rose 0.2 percent to 89.25 yen, from 89.05
yen yesterday.
To contact the reporter for this story: Nick Baker in New York at
nbak...@bloomberg.net ; Craig Trudell in New York at ctrude...@bloomberg.net .
Beamed from my MonkeyBerry®
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