In the U.S.: Stock Futures Rise on EU Summit Optimism

7 December 2011

S&P’s forecasted year-end close of 1350  seems like a good bet so far. Will there be a spanner thrown in the works?

U.S. stock-index futures rose, indicating the Standard & Poor’s 500 Index will climb for a third day, amid speculation European leaders will agree on measures to ease the region’s debt crisis at a summit this week.

JPMorgan Chase & Co. (JPM), the biggest U.S. lender by assets, climbed 0.5 percent in early New York trading, leading financial shares higher.

Futures on the S&P 500 expiring this month rose 0.4 percent to 1,259.9 at 7:26 a.m. in New York after earlier climbing as much as 1 percent. The S&P 500 has struggled to make any headway this year, rising less than 0.1 percent (SPX), as the euro area’s debt crisis spread to the 17-nation currency’s larger economies. Still, the gauge is the only major developed equity market of 24 tracked by Bloomberg that hasn’t fallen this year. Dow Jones Industrial Average futures also expiring in December added 48 points, or 0.4 percent, to 12,160 today.

“All is not lost for investors, especially as U.S. growth rates appear to be accelerating,” said Dan Greenhaus, the chief global strategist at BTIG LLC in New York. “The only question at this point is how deep the European recession will be and what effect it has on other regions.”

German Chancellor Angela Merkel and French President Nicolas Sarkozy will argue for rewriting European Union treaties to tighten control of national budgets at the meeting in Brussels tomorrow and on Dec. 9. U.S. Treasury Secretary Timothy F. Geithner urged the euro area’s governments to work with central banks to erect a “stronger firewall” to end the sovereign-debt crisis.

ECB Interest Rates

At its meeting tomorrow, the European Central Bank will cut its benchmark interest rate to 1 percent from 1.25 percent, according to the median estimate of 58 economists surveyed by Bloomberg News.

Never before has the euro influenced U.S. stocks as much as this year, a sign that American equities aren’t going anywhere until Europe’s credit crisis is solved.

The link between the Dow average and swings in the currency reached a record on Dec. 2, according to data compiled by Bloomberg. The so-called correlation coefficient showing how much two markets rise and fall in tandem hit 0.85, the highest level since the euro was founded in 1999, data on 60-day rolling averages show. A reading of 1 means assets are moving in lockstep.

International investors awarded the U.S. its highest rating in more than two years on optimism that the world’s largest economy will weather the financial crisis in Europe and avoid a recession in 2012, according to a Bloomberg poll.

Bloomberg Global Poll

More than two in five of those surveyed — 41 percent — identify the U.S. as among the markets that will perform best over the next year. That’s up from less than one in three who felt that way in September and is the biggest percentage for the U.S. since the survey began in October 2009. It’s also almost double that of the next two top-rated markets, Brazil and China, according to the quarterly Bloomberg Global Poll conducted on Dec. 5-6 of 1,097 investors, analysts and traders who are Bloomberg subscribers.

“We are hopeful that increasingly loose monetary policy across the globe can result in a reacceleration of growth for export-driven companies in the U.S. by the second half” of next year,’’ said Scott Migliori, the San Francisco-based chief investment officer for the U.S. at RCM, which has about $128.2 billion in assets under management. “Any resolution of global growth concerns and/or clarity on post-election policy in the U.S. could result in a significant re-rating of U.S. equities towards the year end, even in the face of decelerating profit growth.”

JPMorgan, Goldman Sachs

JPMorgan advanced 0.5 percent to $33.40 and Bank of America Corp. (BAC), the second-biggest U.S. lender by assets, rose 0.3 percent to $5.80 in New York. Goldman Sachs Group Inc. (GS) added 0.6 percent to $101.78 and Citigroup Inc. (C) climbed 0.5 percent to $29.89 in early New York trading.

Men’s Wearhouse Inc. (MW) surged 9.4 percent to $29.75 in after- hours trading in New York yesterday. The retailer of men’s suits raised its forecast for full-year earnings excluding some items to at least $2.28 a share, exceeding the average analyst forecast in a Bloomberg survey.


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