In Europe: Stocks Gain Before U.S. Factory Data

1 February 2012


One day up, one day down…you should be used to this by now. European markets buoyed by positive data from U.S., U.K.

European stocks rose, U.S. equity index futures advanced and German bunds fell before a report that may show American manufacturing expanding at the fastest pace since June. U.K. 10-year gilts weakened as a British factory gauge rose to an eight-month high.

The Stoxx Europe 600 Index climbed 1.4 percent at 11:44 a.m. in London. Futures on the Dow Jones Industrial Average added 0.7 percent, indicating the U.S. gauge will snap the longest losing streak since August. The yield on German 10-year bunds rose five basis points, ending a five-day decline, while the equivalent maturity Portuguese yield slid 90 basis points to 15.5 percent after the government sold bills. Gilt yields rose five basis points to 2.02 percent.

The Institute for Supply Management’s factory index rose to 54.5 last month from 53.1 in December, according to the median estimate of 81 economists surveyed by Bloomberg, signaling industry will lead a U.S. expansion. The U.K.’s factory measure unexpectedly returned to growth after a quarter of contraction and separate reports today showed manufacturing indexes for Europe, China and India also rose in January.

“U.S. manufacturing data is key,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “Industrial activity is doing well. Jobs data at the end of the week will be important. As long as there are good economic surprises, that will support stocks.”

ICAP Earnings

More than 10 shares gained for each that fell in the Stoxx 600 (SXXP). ICAP Plc jumped 7.3 percent, the largest increase since June, as the world’s biggest broker of transactions between banks said annual pretax profit will be at the “upper end” of analyst estimates. Banca Monte dei Paschi di Siena SpA and Banco Popolare SC led a rally in Italian banks, advancing more than 7 percent.

Futures on the S&P 500 Index erased an earlier decline of 0.3 percent. Amazon.com Inc. (AMZN) tumbled 8.1 percent in pre-market New York trading after the world’s largest Internet retailer reported sales that missed estimates.

The S&P 500’s 50-day moving average rose yesterday above the 200-day moving average for the first time since August. The pattern, known as a golden cross, may signal the rally will continue, according to some technical analysts and investors whose decisions are influenced by price charts.

The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.3 percent, snapping a two- day advance, while the greenback depreciated for a fifth day against the yen, falling 0.3 percent. The Institute for Supply Management’s factory index for January is due to be published at 10 a.m. New York time. A reading above 50 indicates growth.

Treasury Note

The U.S. 10-year Treasury note fell for the first time in six days, sending the yield three basis points higher to 1.83 percent. German bunds stayed lower as the nation sold 4.093 billion euros ($5.37 billion) of 2 percent 10-year securities at an average yield of 1.82 percent. The Portuguese two-year note yield tumbled 79 basis points to 19.76 percent as the nation auctioned 1.5 billion euros of 105- and 168-day bills.

The cost of insuring against default on European sovereign debt fell, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments declining 10 basis points to 329 basis points.

The Shanghai Composite Index (SHCOMP) dropped 1.1 percent after the 21st Century Business Herald reported new loans in January may be below 1 trillion yuan ($158.6 billion). New loans exceeded that amount every January over the past three years, according to data compiled by Bloomberg.

China’s purchasing managers’ index rose from 50.3 in December to 50.5 in January, the nation’s statistics bureau and logistics federation said in a statement.

Benchmark Indexes

The MSCI Emerging Markets Index (MXEF) advanced 0.2 percent, heading for its highest level since Sept. 2. The ISE National 100 Index (XUU100) jumped 1.4 percent in Istanbul and theMicex Index (MICEX) advanced 1.3 percent in Russia. Benchmark indexes rose at least 0.8 percent in Poland and Hungary.

Electricity for prompt delivery in Germany, Europe’s biggest market, surged as cold weather swept the region. Day- ahead power was up 15 percent at 61 euros a megawatt-hour. Temperatures in the German capital are forecast to fall to minus 16 degrees Celsius (3 Fahrenheit) tomorrow, compared with a five-year norm of minus 4, according to CustomWeather Inc. data on Bloomberg.

Wheat rose to a four-month high of $6.7775 a bushel as Russia will consider a tax on grain exports. Copper advanced to $8,403.75 a metric ton. The U.S. is the second-biggest buyer of the metal. Silver gained 1.9 percent to $33.8125 an ounce.

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