Stocks, Oil Rise, Treasuries Drop on Greece-Bailout Speculation
Nov. 3 (Bloomberg) -- Stocks and commodities rose, while Treasuries slid, as speculation grew that Greece was moving closer to accepting a bailout and the European Central Bank unexpectedly cut interest rates to bolster economies reeling from the region's debt crisis.
The Standard & Poor's 500 Index added 0.5 percent to 1,244.59 at 11:06 a.m. in New York, resuming gains after turning lower following data on service industries that trailed estimates and a prediction by the ECB president that Europe was heading for a mild recession. The Stoxx Europe 600 Index climbed 1.6 percent, while the euro fluctuated. Oil rose 0.9 percent to $93.38 a barrel and the S&P GSCI Index of materials rose 0.7 percent. Ten-year Treasury yields gained six basis points.
Stocks extended gains as the Associated Press reported that Greek Prime Minister George Papandreou has canceled plans to hold a referendum on the latest bailout after the main opposition leader said he would back it, according to two unnamed officials. ECB President Mario Draghi cut the benchmark rate by 25 basis points to 1.25 percent as he chaired a meeting of the governing council for the first time. Papandreou triggered a two-day rout in global stocks earlier this week after saying he wanted voters to decide on the bailout.
"The question is -- is Greece in or out?" Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, said in a telephone interview. "Greece falling out of the euro would be the first clog in a machine that might be broken. It does matter if Greece is there," he said. "You have the ECB giving you a sign that growth issues have the premier emphasis. This is a drama quite frankly."
Market Leaders
Energy, industrial and telephone companies led gains in eight of ten industry groups in the S&P 500. Qualcomm Inc. jumped 6.8 percent as the maker of mobile-phone chips forecast higher sales than analysts predicted. Kraft Foods Inc., the food company planning to split in two next year, added 3.7 percent after raising its earnings forecast. Estee Lauder Cos. gained 14 percent after the cosmetics maker increased its dividend and announced a 2-for-1 split.
Jefferies Group Inc. tumbled as much as 20 percent, triggering a stock-exchange circuit breaker, after Egan-Jones Ratings Co. cut its credit rating to BBB- from BBB. The shares recovered, paring their decline to 7.8 percent, after the investment bank said in a statement that it has no "meaningful net exposure" to European sovereign debt.
Almost six shares gained for every one that fell in the Stoxx 600. Swiss Re Ltd., the world's second-biggest reinsurer, jumped 5.6 percent after reporting better-than-estimated earnings. Cable & Wireless Communications Plc jumped 9 percent after first-half profit rose.
In European bond markets, Greek two-year yields climbed to 107 percent. Yields on 10-year French debt increased five basis points, German rates rose nine points and Italian 10-year debt yields decreased five points.
German and French leaders holding emergency talks before today's G-20 summit withheld 8 billion euros ($11 billion) of assistance for Greece. European leaders yesterday warned Greece will surrender all European aid if it votes against a bailout package agreed last week to contain the crisis.
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net Michael P. Regan in New York at mregan12@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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