Dec. 22 (Bloomberg) -- Stocks rose, sending Europe’s Dow Jones Stoxx 600 Index close to a 14-month high, and government bonds fell on evidence economies around the world are improving. Greek stocks and debt rallied.
The Stoxx 600 climbed 0.6 percent at 1:10 p.m. in London. Futures on the Standard & Poor’s 500 Index added 0.4 percent. Government bonds fell, driving the yield on the U.S. 10-year note to its highest level in four months. Greek debt surged, with the 10-year yield dropping the most in a week, as concern eased that credit downgrades might make the debt ineligible as collateral at the European Central Bank.
November sales of existing U.S. homes probably rose to the highest level in more than two years, economists said before a report today. European Central Bank policy maker Juergen Stark said euro-area growth reached its “economic trough” in the fourth quarter. The U.K. economy shrank by 0.2 percent, according to final figures for the third quarter that beat the 0.3 percent contraction initially reported by the government, while Denmark emerged from recession in the last quarter.
“In the absence of bad news, the market can continue to move back to its highs,” said Kilian de Kertanguy, a fund manager at Cholet-Dupont Gestion SA in Paris, which oversees about $2.3 billion. “Investors want to see the glass half full, and want to be one step ahead.”
Goldman Recommendations
The MSCI World Index advanced 0.2 percent. Greek stocks soared, with the benchmark ASE Index posting the biggest gain among the 18 western European indexes. Bank of Greece SA, the nation’s biggest lender, surged 6.6 percent in Athens.
Barratt Developments Plc and Taylor Wimpey Plc led gains among U.K. homebuilders, adding at least 2 percent, after Goldman Sachs Group Inc. recommended buying the stocks. Julius Baer Group Ltd. rallied 4.2 percent as Goldman Sachs initiated coverage with a “conviction buy” recommendation.
The MSCI Asia Pacific Index climbed 0.9 percent, its biggest gain in almost three weeks. Sony Corp. led Asian exporters higher, rising 2.7 percent in Tokyo, after the Bank of Japan said it will “persistently” keep interest rates close to zero. The yen weakened against the dollar. Nissan Motor Co., which gets 36 percent of its sales in North America, climbed 6.1 percent while bigger rival Toyota Motor Corp. jumped 2.2 percent.
S&P 500 Futures
The gain in U.S. futures indicated the S&P 500 may extend yesterday’s 1.1 percent advance. A report due at 10:00 a.m. in Washington may show sales of existing U.S. homes rose 2.5 percent to a 6.25 million annual rate, in a sign housing is gaining strength along with the broader economy entering 2010, according to the median forecast of economists surveyed by Bloomberg News.
The U.S. economy grew at a 2.8 percent annual rate in the third quarter, economists predicted the Commerce Department’s final reading on gross domestic product will show at 8:30 a.m. today in Washington.
China’s Shanghai Composite Index lost 2.3 percent for its lowest closing value since Oct. 30 on concern the government will accelerate measures to curb asset bubbles. Industrial and Commercial Bank of China Ltd. led declines among banks after central bank Governor Zhou Xiaochuan said reserve requirements for lenders remain an important policy tool. Poly Real Estate Group Co., the second-largest developer by market value, slid 2.8 percent.
Bonds Decline
Declines in the U.S. 10-year note drove the yield up by as much as 6 basis points to 3.74 percent, the highest level since Aug. 13. The yield on the 10-year German bund, Europe’s benchmark government security, climbed 5 basis points to 3.24 percent.
U.S. 10-year yields have increased 50 basis points this month, widening the difference, or spread, with bunds to 48 basis points yesterday, the biggest gap since July 2007. The spread was 49 basis points today.
Emerging-market bonds outperformed, sending the extra yield investors demand to own the debt over U.S. Treasuries down 6 basis points to 2.86 percentage points, the lowest level since August 2008, according to JPMorgan Chase & Co.’s EMBI+ Index.
The cost of insuring against a default on European high-yield corporate bonds in the credit-default swaps market fell to a 19-month low, with the Markit iTraxx Crossover Index dropping 6.5 basis points to 452.5, according to JPMorgan Chase & Co.
Greek Relief
Greek 10-year notes rose, with the yield falling 22 basis points, the biggest decline since Dec. 16. Moody’s Investors Service lowered the government’s rating one step to A1 and said the likelihood that the ECB will make the debt of any euro-member state ineligible at repurchase operations is “very remote.”
The difference in yield between the 10-year Greek bond and the German bund, Europe’s benchmark government security, narrowed 27 basis points to 250 basis points. It was 184 basis points at the start of this month.
Copper for delivery in three months declined 0.9 percent to $6,875 a metric ton on the London Metal Exchange, leading a retreat in industrial metals. Gold for immediate delivery fell 0.6 percent to $1,087.4 an ounce in London.
Crude oil dropped after the Organization of Petroleum Exporting Countries agreed to maintain production targets at a meeting in Angola. Crude oil for February delivery dropped as much as 59 cents, or 0.8 percent, to $73.13 a barrel in electronic trading on the New York Mercantile Exchange.
To contact the reporter on this story: David Merritt in London at dmerritt1@bloomberg.net.
