Broadgate: Market News 11/6
11 June 2012
U.S. stocks rallied, driving the Standard & Poor’s 500 Index to its best weekly gain since December, amid speculation European and American central banks will join China in trying to spur economic growth.
All 10 S&P 500 industry groups rose during the week as financial companies jumped the most, adding 4.7 percent. Chesapeake Energy Corp. soared 18 percent, leading gains in commodity producers amid plans to replace almost half its board and an agreement to sell its pipeline interests. Home Depot Inc. climbed 9.2 percent after boosting its share repurchase program. Facebook Inc. slipped 2.2 percent for its third straight weekly loss since it went public in May.
The S&P 500 rose 3.7 percent to 1,325.66, rebounding from a 3 percent slump last week. The Dow Jones Industrial Average climbed 435.63 points, or 3.6 percent, to 12,554.20, the biggest increase since Dec. 23, after dipping below its 2011 closing level on June 1 amid a worse-than-forecast jobs report.
“The optimism comes from the belief that there is going to be some kind of coordinated activity from central banks,” Bill Greiner, who oversees $13 billion as chief investment officer at Mariner Wealth Advisors in Kansas City, Missouri, said in a phone interview. “The question in my mind is how close to the edge do the world of investors have to move before the central banks start to move in the direction that they need to.”
Investors gravitated toward stocks during the week after the S&P 500 retreated 9.9 percent from an April high, pushing its valuation to 12.9 times earnings from the last 12 months. That’s 21 percent below the average of 16.4 since 1954, according to data compiled by Bloomberg.
European stocks posted their biggest weekly advance in four months as China cut interest rates and the European Central Bank said it’s ready to add more stimulus if the economy worsens.
Banco Espirito Santo SA and CaixaBank led gains on a gauge of lenders as Spain moved closer toward seeking emergency aid to rescue its banking system. Assicurazioni Generali SpA, Italy’s largest insurer, jumped 8.4 percent as it named a new chief executive officer. MAN SE, climbed 5.6 percent after Volkswagen AG increased its stake in the truckmaker.
The Stoxx Europe 600 Index advanced 2.9 percent to 241.93 this past week, the biggest jump since Feb. 3. The benchmark measure has still tumbled 11 percent from this year’s high on March 16 on concern Greece may be forced to leave the euro currency union. The selloff has left the gauge’s valuation at 10.1 times estimated earnings of its companies, according to data compiled by Bloomberg.
“The bottom line for this week’s rebound was a technical recovery, backed by high hopes of stimulus in the U.S. and in Europe,” said Trung-Tin Nguyen, a Zurich-based hedge-fund manager at TTN AG. “The recovery could still continue for a little while, but there’s still a lot of noise disturbing the markets, with the Greek elections coming up and Spain’s problems still looming.”
National benchmark indexes climbed in 14 of the 18 western European markets this week. The U.K.’s FTSE 100 gained 3.3 percent. France’s CAC 40 rose 3.4 percent and Germany’s DAX added 1.3 percent. Spain’s IBEX 35 rallied 8 percent.
Oil pared losses and struggled to the first weekly gain in six weeks on the possibility that discussions by European finance officials this weekend would yield a bailout for Spain.
Crude rebounded by $1.21 in the last 20 minutes of floor trading as Spain prepared to become the fourth of the 17 euro- area countries to seek emergency assistance. Earlier, oil dropped as much as 3.3 percent after Federal Reserve Chairman Ben S. Bernanke damped expectations for monetary stimulus.
Oil for July delivery fell 72 cents, or 0.8 percent, to settle at $84.10 a barrel on the New York Mercantile Exchange. Prices rose 1 percent this week. They have decreased 15 percent this year.
“The euro can’t fall forever,” said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal. “There was bound to be some profit-taking at some point, or some hope that Europe would finally embrace the euro bond, or more importantly, the bank recapitalization from Spain.”
The euro rose 2.5 percent to 99.47 per yen, its first weekly increase since April 20. The shared currency gained 0.7 percent to $1.2517 for its first rise against the greenback in six weeks. The yen lost 1.9 percent to 79.49 per dollar.
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