BLBG: Dollar Gain as Spending, AIG Deal Bolster Confidence
By Rita Nazareth and Stuart Wallace
March 1 (Bloomberg) -- Stocks and the dollar rose as growth in U.S. consumer spending, a possible European rescue of Greece and American International Group Inc.’s $35.5 billion sale of an Asian unit bolstered confidence in the economic recovery.
The Standard & Poor’s 500 Index increased 0.6 percent at 9:54 a.m. in New York, as did Europe’s Stoxx 600 Index. The Dollar Index climbed 0.8 percent to 80.987, near its highest level since June. Copper rose the most in 11 months after the earthquake in Chile, the world’s biggest producer of the metal. Greek bonds rallied, sending the yield on the two-year note down 39 basis points to 5.75 percent.
Spending by U.S. consumers increased 0.5 percent in January for a fourth consecutive gain, signaling the biggest part of the economy may contribute more to growth in coming months. AIG’s $33.5 billion sale of an Asian life-insurance unit to Prudential Plc is its largest since the company received a U.S. government bailout in 2008.
“AIG/Prudential is a pretty big deal,” said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees more than $200 billion. “That indicates M&A is alive and well, stimulating people’s interest in the stock market. On top of that, we had the spending number this morning and any sign that consumer confidence is improving has to be positive for the market.”
S&P 500 Leaders
The S&P 500 rose after dropping 1.8 percent last week, its biggest decline in three weeks. Gains were led by commodity and technology companies, with Exxon Mobil Corp. and Apple Inc. each climbing more than 0.6 percent.
Billionaire Warren Buffett, writing in a Feb. 27 letter to investors, said the U.S. residential real estate slump will end by about 2011.
The pound dropped 2 percent to $1.4936 after sliding to $1.4784, the lowest level since May 1. The U.K. currency fell against all 16 of its most-traded counterparts, weakening 1.4 percent to 90.988 pence per euro.
The declines in the pound came after a YouGov Plc poll indicated an election due by June 10 would leave neither Gordon Brown’s ruling Labour party nor the opposition Conservatives with a majority of seats in Parliament, hampering efforts to cut the record deficit. European Union officials may demand deeper budget cuts from Greece in meetings today.
Pound ‘Suffering’
“Sterling is really suffering and leading the way,” said Ian Stannard, a senior currency strategist at BNP Paribas SA in London. “And in the eurozone, problems are going to continue and the euro is going to continue to suffer as a result.”
U.K. gilts and German bonds declined. The yield on the 10- year gilt rose six basis points to 4.08 percent, and the similar maturity German bund yield climbed one basis points to 3.11 percent.
Copper rose as high as $3.487 a pound in New York trading, erasing this year’s decline. Mines in Chile, which exports 36 percent of the world’s copper ores and concentrate, were closed by the magnitude-8.8 earthquake Feb. 27. Lead, zinc and nickel also rose in London.
Greek bonds and stocks rallied as European Union governments crafted a possible rescue package. The yield on the two-year Greek note slid as much as 69 basis points, the biggest decline since Feb. 10. The cost of insuring Greek bonds against default fell, with credit-default swaps tied to the nation’s debt dropping 28.5 basis points to 335.5, according to CMA DataVision.
Greece’s ASE Gains
The ASE Index of equities rose for a second day, advancing as much as 3.4 percent.
The MSCI World Index of 23 developed nations’ stocks fluctuated. Prudential Plc fell 11 percent after agreeing to buy one of American International Group Inc.’s Asian life-insurance units for $35.5 billion. BHP Billiton Ltd. and Rio Tinto Group both advanced as commodities climbed. Vivendi SA surged as much as 4.2 percent after the owner of the world’s largest video-game company reported earnings that beat estimates.
The MSCI Emerging Markets Index rose, extended its two-day rally to 2.6 percent, as gains by commodity producers lifted Russia’s Micex Index 1 percent.
Turkey’s ISE National 100 Index jumped 2.2 percent and the lira strengthened for the first time in three days on speculation tension between the military and the government is easing after the release of eight officers questioned in an investigation into allegations of a 2003 coup plot against Prime Minister Recep Tayyip Erdogan’s government.
To contact the reporter for this story: Stuart Wallace in London at swallace6@bloomberg.net
