Stocks climbed, Treasuries fell and gold dropped the most in almost three weeks as a bigger-than- forecast drop in U.S. jobless claims tempered concern the economic recovery is slowing. Australia’s dollar strengthened.
The S&P 500 advanced 0.5 percent to 1,104.18 at 4 p.m. in New York, paring a gain of as much as 1 percent after Bloomberg News reported that Deutsche Bank AG may sell as much as $11.4 billion in stock. The Stoxx Europe 600 Index added 1.1 percent, extending a four-month high. The yield on 10-year Treasuries rose 10 basis points to 2.75 percent and gold dropped 0.5 percent as investors pursued riskier assets. The Australian dollar appreciated against all 16 most-traded peers.
The drop in initial jobless claims follows a bigger-than- forecast increase in private U.S. payrolls last week and helped ease concern that the world’s largest economy was headed for a double-dip recession. Financial companies led gains in equities, with a measure of banks in the S&P 500 gaining 1.8 percent, as analysts predicted an increase in takeovers and share buybacks.
“Any positive news on the employment front is good news for stocks,” said Mark Bronzo, an Irvington, New York-based fund manager at Security Global Investors, which oversees $21 billion. “It helps alleviate the negative sentiment we’ve had over the summer as markets struggled because of pessimism about the economy.”
The S&P 500 rose for the sixth time in seven days after the Labor Department said first-time unemployment claims decreased by 27,000 to 451,000 in the week ended Sept. 4. Initial claims were projected to fall to 470,000, according to the median forecast of 46 economists in a Bloomberg survey.
Dividends, Mergers
Fifth Third Bancorp and Zions Bancorp climbed at least 2.6 percent to lead gains in banks after Rochdale Securities analyst Richard Bove said the lenders were vulnerable to takeovers because of cheap valuations, the likelihood they will meet new capital requirements and low levels of non-performing assets.
Large U.S. banks are well-positioned for new international capital requirements being drafted by the Basel Committee on Banking Supervision, Morgan Stanley analysts said. The so-called Basel III standards, which Group of 20 nations will review at a meeting in November, will enable U.S. banks such as JPMorgan Chase & Co. to boost dividends, the analysts wrote. Shares of JPMorgan rallied 2.5 percent.
U.S. equities pared gains after three people familiar with the matter told Bloomberg News that Deutsche Bank AG, Germany’s largest lender, approached investment banks to assess interest in managing a stock sale of as much as 9 billion euros ($11.4 billion.) Deutsche Bank’s U.S. shares tumbled 3.2 percent, wiping out an earlier 3.4 percent rally. S&P 500 financial shares rose 1.2 percent, paring a 2 percent advance.
‘Ugly Period’
“We just lived through a pretty ugly period based on concerns about bank capital adequacy, and the impetus for our most recent selloff from the end of April was driven by fear of European banks being in the same situation American banks were in in 2008,” said James Gaul, a money manager at Boston Advisors LLC in Boston, which manages $1.5 billion. “For such a large capital raise to be needed by this big German bank that should be one of the models of efficiency and stability, that could potentially make investors nervous.”
The Federal Reserve said yesterday the U.S. economy kept its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August. European Central Bank council member Erkki Liikanen said a double dip in the global economy is “not likely.”
‘Extreme Bearishness’
The S&P 500 plunged 14 percent from its 2010 high on April 23 through the end of August amid signs the economic rebound was slowing. The measure has rebounded 5.2 percent this month as better-than-estimated reports on manufacturing and housing bolstered confidence in the recovery.
“Some of the extreme bearishness of the past few weeks has been flowing out,” said Stephen Halmarick, who helps manage about $135 billion as head of investment-markets research at Colonial First State Global Asset Management in Sydney.
Johnson & Johnson, Pfizer Inc. and Merck & Co. led a gauge of health-care stocks to a 1.2 percent gain, the second-biggest among 10 groups in the S&P 500, after a U.S. appeals court suspended a ban on stem-cell research while it reviews a district-court ruling.
Lifting the ban allows the government to temporarily resume funneling tens of millions of dollars to scientists that seek cures for diseases such as Parkinson’s, spinal cord injuries, and genetic conditions by studying cells taken from human embryos.
European Shares
More than five shares rose for every one that fell in Europe’s Stoxx 600, which added 2.76 points to 265.09. Daimler AG led carmakers higher, advancing 2.6 percent as Credit Suisse Group AG lifted its per-share earnings estimate. Home Retail Group Plc retreated 2.8 percent after forecasting profit at the bottom end of estimates.
Australia’s dollar appreciated 0.6 percent to 92.35 U.S. cents and climbed 0.5 percent to 77.42 yen. The nation’s employers added 30,900 workers in August, exceeding the median forecast for 25,000 in a Bloomberg News survey of 25 economists.
The U.S. dollar weakened against all but four of 16 major peers. The pound weakened 0.2 percent to $1.5439 after the U.K. trade deficit widened to a record.
Default Swaps
A gauge of corporate credit risk in the U.S. fell to the lowest since Aug. 10. The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined as much as 2.9 basis points to a mid- price of 102.5 basis points. The index typically falls as investor confidence improves and rises as it deteriorates.
The 30-year Treasury bonds extended losses, pushing the yield up 11 basis points to 3.84 percent after the government’s $13 billion sale of the debt drew higher yields than traders forecast.
Greece’s 10-year bond yields fell 10 basis points to 11.72 percent. Norway, which has amassed the world’s second-biggest sovereign wealth fund, says Greece won’t default on its debts and its $450 billion Government Pension Fund Global has stocked up on Greek debt.
Ireland sold 400 million euros ($509 million) of treasury bills at the lower end of forecasts a day after the government said it will split Anglo Irish Bank Corp. to stabilize the cost of the bank bailout. Investors bid for 5.4 times the 250 million euros of debt sold due April 2011, up from 4.1 times at the Aug. 26 sale.
Global Stocks, Asia
The MSCI World Index of stocks in 24 developed nations gained 0.7 percent and earlier reached the highest level since Aug. 11. The MSCI Asia Pacific Index advanced 0.9 percent. National Australia Bank Ltd. rallied 3.7 percent on optimism it won’t need to raise capital to finance a takeover. SM Prime Holdings Inc., the Philippines’ biggest shopping-mall operator, jumped 9.7 percent after the nation’s exports increased.
The MSCI Emerging Markets Index advanced 0.4 percent. The Philippine Stock Exchange gained for an eighth day and closed up 2.6 percent at an all-time high. Russia’s Micex Index climbed 1.1 percent as oil advanced. China’s Shanghai Composite Index dropped 1.4 percent, the most in two weeks, as increasing property prices fueled concern the government will step up measures to curb speculation.
Crude oil fell, reversing earlier gains, after a government report showed U.S. inventories rose to the highest level since at least 1990. Oil for October delivery slipped 0.6 percent to $74.26 a barrel on the New York Mercantile Exchange.
Copper fell the most in a week as a report that Chinese regulators are investigating positions in rubber futures fueled speculation that some traders would be forced to sell commodities. Copper for delivery in three months fell 1.6 percent to $3.4435 a pound on the Comex in New York, the biggest lost for a most-active contract since Aug. 31. Rubber prices plunged in Shanghai, with declines spilling over into copper, zinc, soybeans and sugar, after the Securities Times report. Aluminum, zinc and lead also dropped in London.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net