Record retail sales, Euro optimism spur stocks

Global stocks rose for the first time in 11 days and commodities and the euro advanced as European leaders drafted a framework for the region’s bail-out fund and America’s Thanksgiving retail sales jumped to a record. Treasuries declined.

The MSCI All-Country World Index added 1.8 percent at 9:30 a.m. in New York and the Standard & Poor’s 500 Index rallied 1.3 percent, halting a seven-day losing streak. The euro strengthened 1.2 percent to $1.3392. The yield on the 10-year German bund advanced seven basis points, with the similar- maturity Treasury yield jumping 10 points. The cost of insuring against default on European government debt fell for the first time in eight days. Oil rose 2.5 percent.

Europe’s rescue fund may insure bonds of debt-stricken countries with guarantees of 20 percent to 30 percent, depending on financial markets, according to guidelines that finance ministers will discuss this week. Treaty change is necessary to give veto power over member-state budgets to the European Union Commission, Germany’s Finance Minister Wolfgang Schaeuble said on ARD television in Berlin yesterday. U.S. retail sales over the Thanksgiving holiday climbed 16 percent to a record.

“European leaders have been pushed into a position that they have to do something,” said Mike Lenhoff, the London-based chief strategist at Brewin Dolphin Securities Ltd., which oversees $39 billion. “We are getting to a point where policy makers are now responding. The message from the market is clear: get your act together or we are going to destroy you.”

Stocks Rebound

About $4.6 trillion was wiped from the value of global equities this month on mounting concern that Europe’s debt crisis is spreading. Moody’s Investors Service said the “rapid escalation” of the crisis threatens all of the region’s sovereign ratings. Belgium paid the most since 2000 to sell debt.

The S&P 500 rebounded after slumping 4.7 percent last week, its biggest drop since September and worst Thanksgiving week since 1932. AT&T Inc. rose as it was said to consider offering to divest as much as 40 percent of T-Mobile USA’s assets to convince the Justice Department to let the company take over the U.S. unit of Deutsche Telekom AG. Commercial Metals Co. rallied after Carl Icahn offered to buy the company.

Retail sales totaled $52.4 billion during the holiday weekend and the average shopper spent $398.62, up from $365.34 a year earlier, the Washington-based National Retail Federation said yesterday, citing a survey conducted by BIGresearch.

The yield on the 30-year U.S. Treasury bond advanced 11 basis points to 3.03 percent, rising above 3 percent for the first time since Nov. 18.

The biggest bond dealers in the U.S. say the Federal Reserve is poised to start a new round of stimulus, injecting more money into the economy by purchasing mortgage securities instead of Treasuries.

Fed Speculation

The Fed, which bought $2.3 trillion of Treasury and mortgage-related bonds between 2008 and June, will start another program next quarter, 16 of the 21 primary dealers of U.S. government securities that trade with the central bank said in a Bloomberg News survey last week. The Fed may buy about $545 billion in home-loan debt, based on the median of the 10 firms that provided estimates.

Industry groups tracking mining and financial stocks were the best performers in the MSCI All-Country World Index, helping the gauge rebound from a 10-day, 9 percent slump. The index is valued at 11.2 times estimated profits, compared with a five- year average of 13.6 times, data compiled by Bloomberg show.

European Stocks

The Stoxx Europe 600 Index rallied 3.3 percent for its largest gain in a month as the gauge rebounded from its biggest weekly slide since September. All 19 industries in the benchmark measure climbed more than 1.5 percent with gauges of banks, auto companies and insurers posting the biggest gains. Deutsche Bank AG jumped 7 percent, BNP Paribas SA surged 10 percent, Societe Generale SA advanced 6.6 percent and UniCredit SpA added 6.6 percent.

The Organization for Economic Cooperation and Development said today that growing doubt about the survival of Europe’s monetary union has caused global growth to stall and represents the main risk to the world economy. The 34 OECD nations will expand 1.9 percent this year and 1.6 percent next, down from 2.3 percent and 2.8 percent predicted in May, the Paris-based organization said in a report.

The Dollar Index, which tracks the U.S. currency against those of six trading partners, declined 1.1 percent, with the pound rising 1 percent to $1.5587. The euro appreciated 1.5 percent versus the yen.

New Zealand Dollar

New Zealand’s dollar surged 2.2 percent against the greenback after Prime Minister John Key was re-elected with his party’s biggest mandate in 60 years.

The International Monetary Fund said today it isn’t discussing a rescue package with Italy after La Stampa newspaper reported it may be preparing a loan of as much as 600 billion euros ($802 billion).

Bond markets in the euro area “are not functioning normally,” Bank of France Governor Christian Noyer said.

Noyer reiterated his resistance to buying more government bonds from the euro area to shore up confidence, saying that “any lasting liquidity backstop” must come from governments and not the central bank. Monetary authorities from the U.S. and U.K., which have been buying “significant amounts” of public debt, would be risking spikes in long-term interest rates “in a different inflation environment,” and markets are already hedging against inflation “tail risks,” he said.

Belgian Auction

Belgian 10-year bonds fell 25 basis points to 5.57 percent after the nation sold 2 billion euros ($2.68 billion) of bonds maturing between 2018 and 2041. The debt agency in Brussels sold 450 million euros of bonds due in September 2021 at a weighted average yield of 5.659 percent, up from 4.372 percent in the previous sale on Oct. 31 and the most since January 2010. Demand for the securities was 2.59 times the amount of notes sold, up from 1.65 times a month ago.

It’s the first debt sale since S&P lowered Belgium’s credit standing one step to AA with a negative outlook on Nov. 25. Coalition talks produced a budget agreement less than 24 hours later.

Italian bonds rose for the first time in six days as the country’s banking association promoted an initiative to encourage purchases of the securities today. The yield on the 10-year security dropped 10 basis points to 7.16 percent after surging 62 basis points last week. The government sold 567 million euros of September 2023 index-linked bonds at a yield of 7.3 percent. The maximum target for the auction was 750 million euros.

Emerging Markets

The MSCI Emerging Markets Index jumped 2.8 percent, heading for its biggest gain in a month after closing last week at a seven-week low. The Micex Index surged 3.7 percent in Moscow as oil rose in New York. The Hang Seng China Enterprises Index of Chinese stocks listed in Hong Kong gained 2.3 percent and the BSE India Sensitive Index, or Sensex, rose 3 percent, the most since Aug. 29.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped from a record, falling 11 basis points to 374. Debt-insurance costs for European financial companies also fell from the highest ever, with the Markit iTraxx Financial Index of default swaps linked to the senior bonds of 25 banks and insurers declining 18 basis points to 340.

Gasoline climbed 3.5 percent to $2.5340 a gallon. Copper jumped 3.3 percent to $7,465.75 a metric ton. New York silver futures advanced 3.3 percent and the S&P GSCI index of 24 commodities gained 2 percent, the most since Oct. 27.

—Bloomberg