In the U.S.: U.S. Stock Futures Rise As Europe Leaders Reach Agreement

29 June 2012

Euro fears quietened. Bank rally set to lift markets this morning.

U.S. stock futures advanced, indicating the Standard & Poor’s 500 Index will trim its first quarterly decline since September, after European leaders reached an agreement that alleviated concern banks will fail.

Bank of America Corp. and Citigroup Inc. (C) rallied at least 3.4 percent, following a surge in European lenders. Alcoa Inc. (AA) and Freeport-McMoRan Copper & Gold Inc. added more than 2.1 percent as commodities jumped amid a U.S. dollar slump. Nike Inc. (NKE), the largest sporting-goods company, tumbled 11 after profit unexpectedly declined for the first time since 2009.

S&P 500 (SPX) futures expiring in September rose 1.8 percent to 1,345.80 at 8:38 a.m. New York time. Dow Jones Industrial Average futures added 176 points, or 1.4 percent, to 12,702.

“The chances of a euro-zone break-up have been lowered for the short term,” said Graham Neilson, who helps manage about $21.9 billion as chief investment strategist at Cairn Capital Ltd. in London. “The statements from leaders at the European summit should further help the current relief for markets.”

Equity futures joined a global rally as euro-area leaders agreed to relax conditions on emergency loans for Spanish banks and possible help for Italy as an outflanked GermanChancellor Angela Merkel gave in on expanded steps to stem the debt crisis. In the U.S., data showed that consumer spending stalled in May. Consumer sentiment dropped in June to a six-month low, economists predicted.

More than $1 trillion was erased from U.S. equity values this quarter amid concern about a worsening of Europe’s debt crisis and a global slowdown. The S&P 500 tumbled 5.6 percent through yesterday led by technology and financial shares. The benchmark measure has risen 1.4 percent so far this month amid expectations global policy makers would act to spur growth.

Banks Rally

Some of the largest companies gained today. Financial companies surged as a measure ofEuropean lenders added 3.9 percent. Bank of America climbed 3.4 percent to $8. Citigroup increased 3.6 percent to $27.33.

Energy and raw material producers advanced as commodities jumped the most in almost six months. Alcoa, the first company in the Dow to report quarterly results on July 9, added 2.1 percent to $8.69. Freeport-McMoRan, (FCX) the world’s biggest publicly traded copper miner, rose 3.8 percent to $33.48. Schlumberger Ltd. (SLB), the world’s largest oilfield-services provider, increased 2.7 percent to $64.44.

Nike tumbled 11 percent to $86.20. Chief Executive Officer Mark Parker responded to higher costs by introducing widespread price increases in January to improve Nike’s gross profit margin, which narrowed for the sixth straight quarter. The company’s sales also slowed in Europe, where it generates about a quarter of its revenue.

RIM Plunges

Research In Motion Ltd. (RIM) plunged 15 percent to $7.79 after posting a loss and delaying the next BlackBerry operating system, increasing pressure on the company to find an acquirer. The Waterloo, Ontario-based smartphone maker also said it would cut 5,000 jobs.

Initial public offerings fell 34 percent this quarter as Facebook Inc. (FB)’s disappointing debut and worsening economic conditions rattled investors, pressuring companies to lure buyers with cheaper valuations.

IPOs globally raised $41.3 billion, the worst second quarter since 2009, data compiled by Bloomberg show. That compared with $62.7 billion a year ago. At least 50 companies shelved sales as Europe’s debt crisis spread, growth prospects slowed in China and Facebook’s stock sank 17 percent from its May 17 IPO price.

“With the economy and with Europe, there are more questions than answers in investors’ minds, and they want some clarity before they put their money down,” said Matt McCormick, who helps oversee $6.2 billion at Cincinnati-based Bahl & Gaynor Inc. “After what happened with Facebook, people want IPOs to go off without a hitch.”


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