By Stephen Kirkland and Inyoung Hwang
Global stocks rose for the first time in five days, commodities gained and Treasuries slid as U.S. reports showed consumer confidence reached the highest level since 2008 and home values jumped the most in seven years. The yen weakened while the dollar rose.
The MSCI All-Country World Index gained 0.5% at 3:26 p.m. in New York and the Standard & Poor’s 500 Index climbed 0.6% to 1,659.33. The 10-year Treasury yield added 14 basis points to 2.15%, the highest since April 2012. Japan’s currency slid against 15 of its 16 major peers as an adviser to the prime minister said the central bank can add to its stimulus. The S&P GSCI commodities gauge jumped 1%, the most in almost a month.
The Conference Board’s index of consumer sentiment climbed more than forecast to 76.2, the strongest level in more than five years. The S&P/Case-Shiller index of property values increased 10.9% in the 12 months through March, the most since April 2006. The Bank of Japan should loosen monetary policy further if needed, said Koichi Hamada, adviser to Prime Minister Shinzo Abe, while European Central Bank Executive Board Member Peter Praet said the central bank will continue to do what is necessary, according to an article in Handelsblatt.
“The confidence data is really inspiring,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC in Philadelphia, which manages $55 billion, said by telephone. “It’s reinforcing the picture that we continue to see strong momentum in the housing market, which is good news for the consumer’s wallet,” he said. “Our markets are responding somewhat favorably to news from Europe that there’s discussion of further stimulative activity. It’s a trifecta of good data points.”
Market Leaders
Nine out of 10 S&P 500 groups rose, as gauges of financial, commodity and and health-care shares rallied more than 0.8% to lead gains while utilities and telephone stocks posted the only declines. Merck & Co. added 1% after Jefferies & Co. lifted the stock to a buy. Exxon Mobil Corp. and Bank of America Corp. paced gains among the biggest U.S. companies, rising at least 0.9%. Tiffany & Co. increased 4.5% after reporting first-quarter earnings that beat analysts’ estimates amid growing demand in Asia.
Financial shares in the S&P 500 rallied 1% as a group. Moody’s Investors Service upgraded its view of the U.S. banking system to “stable” from “negative” for the first time since 2008, citing an improved operating environment and less risk from a weak economy. Lenders have built capital and reduced costs from bad credit, Moody’s said in a statement today.
Financial Shares
“Sustained GDP growth and improving employment conditions will help banks protect their now-stronger balance sheets,” Sean Jones, co-author of the report, said in the statement.
Options traders are paying the least in more than two years to hedge against declines in U.S. financial shares, reassured by analysts who say they will report the biggest profit since 2007 this year.
Puts protecting against a 10% decline in the Financial Select Sector SPDR Fund cost 4.12 points more than calls betting on a 10% increase, according to three-month options data compiled by Bloomberg. That’s the lowest since November 2010. Banks and brokerages in the S&P 500 rallied 20% this year
Today’s rally eased concern that last week’s 1.1% slump in the S&P 500 signaled more losses to come. The S&P 500 reached an intraday record of 1,687.18 on May 22 and fell 1.9% through the close. The previous two times the benchmark gauge set an intraday high and dropped more than 1% from that level in the same day, it marked the end of a bull market, according to data compiled by Bloomberg. The 1.4% retreat on Oct. 11, 2007, was followed by a 56% plunge the next 17 months. On March 24, 2000, the S&P 500 reached a record 1,552.87, fell 1.6% that day and then erased 49% through October 2002.
Balanced Funds
Investors are pumping record amounts of money into U.S. balanced funds, whose freedom to buy stocks and bonds made them barometers for gains in the biggest bull markets of the past half century.
Managers led by Capital Research & Management Co. and Invesco Ltd. received $35.2 billion from January to April, the most in any four months, according to data compiled by Bloomberg and the Washington-based Investment Company Institute. Assets in the funds increased 3.6%, compared with 1.2% for those that only buy equities.
Europe Markets
The Stoxx Europe 600 Index advanced for a second day, climbing 1.3%. Societe Generale SA and Barclays Plc advanced more than 2.5%. AstraZeneca Plc increased 2.7% after agreeing to pay $323 million for Omthera Pharmaceuticals Inc., a U.S. drugmaker with an experimental treatment for patients with high levels of triglycerides, which can contribute to heart attacks and strokes. Omthera jumped a record 99%.
Europe’s benchmark equity gauge has rallied 3.9% so far this month and the S&P 500 has risen 3.9% in the period, the most since January.
The MSCI Emerging Markets Index added 0.1%, advancing for a third day, as benchmark gauges in China, Russia, Hungary, Indonesia and Thailand rose at least 1%. Taiwan Semiconductor Manufacturing Co. led declines among exporters, dropping 2.2%, on concern a weaker yen will hurt their competitiveness.
Rand, Yen
The rand retreated as much as 1.9% versus the dollar, trading at the lowest level since 2011, after a report showed South Africa’s economic growth slowed to an annualized 0.9% in the first quarter. That was less than the 1.6% median of 15 estimates in a Bloomberg survey.
The yen slid 1.2% to 102.23 per dollar as Hamada said central bank Governor Haruhiko Kuroda “should continue to trust in his judgment and ease further” if needed. Japan’s currency lost 0.9% per euro. The 17-nation shared currency slipped 0.4% to $1.2877 while the dollar strengthened versus 14 of 16 major peers.
The Japanese currency’s decline versus the dollar takes its retreat in May to 4.7%. That would be an eighth month of declines. More yen weakness is “not out of the question,” Hamada said in an interview in Tokyo today.
Italy Auction
Italy’s borrowing costs fell to a record low at the sale of 2.5 billion euros ($3.23 billion) of zero-coupon 2014 notes. The yield on 10-year bonds dropped two basis points to 4.03%.
The cost of insuring corporate bonds declined with the Markit iTraxx Europe Index of credit-default swaps linked to 125 investment-grade companies sliding two basis points to 95 basis points.
U.K. government bonds retreated with Treasuries. The yield on the U.K.’s 10-year securities climbed five basis points to 1.96%, the highest since March 15. The rate on similar- maturity German bunds increased four basis points to 1.50%, also the highest since March.
Treasuries lost 1.3% this month through yesterday, set for their biggest loss in 29 months, a Bank of America Merrill Lynch index shows. German bonds slipped 1.2% and U.K. securities tumbled 1.7%.
The S&P GSCI climbed for the first time in a week, led by a 2.7% rally in corn before a government report that may show wet weather slowed planting in the Midwest. The index is up 1% this month even as gold tumbled 6% and silver dropped about 8%.
Heating oil advanced 1.8% today and West Texas Intermediate oil rallied 0.9% to $95.01 a barrel, the first gain in a week. The Organization of Petroleum Exporting Countries is expected to keep its output target at 30 million barrels a day on May 31 when the group meets in Vienna, a Bloomberg News survey shows.
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