Stocks, U.S. Futures Advance on Economic Outlook
Stocks rallied and U.S. index futures advanced on speculation economic reports will indicate the world’s biggest economy is gathering strength. The yen weakened and government bonds fell.
The MSCI World Index, a gauge of equities in 24 developed nations, climbed 1.1 percent at 9:05 a.m. in New York. Futures on the Standard & Poor’s 500 Index rose 0.4 percent, signaling the benchmark gauge may add to yesterday’s 2.6 percent surge. The yen slipped against all 16 of its most-traded counterparts and the dollar dropped against 13. French, Dutch and Australian 10-year notes led the decline in government bonds while the cost of protecting European corporate bonds from default sank.
U.S. service industries probably expanded in May at the fastest pace in four years while factory orders rose, according to Bloomberg surveys of economists, a day before the Labor Department’s monthly jobs report that is forecast to show payrolls climbed by the most since 1983. Reports this morning showed jobless claims decreased last week and private employers added jobs in May.
“Stocks should be rising,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors, which manages about $400 billion. “If we begin to get a continuation of positive economic news, investors will focus on fundamentals. We still have a 12-month target of 1,350 on the S&P 500 and that translates into a near-term target of 1,200 to 1,250.”
Improving Economic Data
U.S. benchmark equity indexes posted their third-biggest advances of 2010 yesterday as rising sales of U.S. homes and cars bolstered confidence in the global economy. Improving economic reports have boosted confidence after the MSCI World fell 12 percent from its April high on concern the European sovereign debt crisis will slow global growth.
Companies in the U.S. added 55,000 workers in May, according to data based on payrolls from ADP Employer Services. The increase was the fourth in a row and followed a revised 65,000 rise the prior month that was twice as much as initially estimated. Initial jobless claims fell by 10,000 last week to 453,000, according to the U.S. Labor Department.
The Institute for Supply Management’s index of non- manufacturing businesses, which covers almost 90 percent of the economy, rose to 55.6 from 55.4 in April, according to the median forecast of 76 economists surveyed by Bloomberg News. The report is due at 10 a.m. in New York. Factory orders are forecast to have increased 1.8 percent, according to a survey of economists before a 10 a.m. government report.
‘Upside’ Surprises
“The global economic recovery is continuing and most economic indicators are surprising to the upside,” said Tobias Merath, head of commodity research at Credit Suisse Group AG in Zurich. “The real economy is going rather well.”
Tomorrow’s Labor Department jobs report will show the U.S. economy added 515,000 jobs in May, the fifth straight month of gains, according to the median of 81 economists’ forecasts. The jump probably reflected a surge in government hiring of temporary help to conduct the census and a 175,000 increase in private employment.
More than 23 shares gained for each that fell on the benchmark Stoxx Europe 600 Index, which rallied 1.9 percent, while the MSCI Emerging Markets Index advanced 1.9 percent.
BP Plc, struggling to control its gushing oil well in the Gulf of Mexico, jumped 3.2 percent in London as investors speculated that the stock’s 30 percent plunge since April was overdone. The shares maintained gains even as Fitch Ratings cut its debt rating AA from AA+.
BHP Rallies
BHP Billiton Ltd., the world’s biggest mining company, increased 1.8 percent in London. Valeo SA, France’s second- largest auto-parts supplier, rallied 6.8 percent in Paris after giving a sales forecast.
The MSCI Asia Pacific Index jumped 2.6 percent, the biggest gain since February. Nissan Motor Co. climbed 4.8 percent in Tokyo after its U.S. sales surged 24 percent in May from a year earlier. Canon Inc., which gets 78 percent of its revenue outside Japan, rose 3.4 percent as a weaker yen boosted its earnings outlook.
Crude oil for July delivery added 0.6 percent to $73.26 a barrel in New York. Commodities also advanced after General Motors Co. and Ford Motor Co. posted U.S. sales increases in May that topped analysts’ estimates.
The yen depreciated 0.4 percent to a two-week low against the dollar and also lost 0.6 percent against the euro. So-called commodity currencies rose, with the Australian dollar advancing 0.7 percent against the U.S. currency. The euro strengthened 0.1 percent to $1.2264 after gaining as much as 0.6 percent.
Government bonds slipped, with the yield on German bunds, the benchmark European debt security, rising five basis points to 2.71 percent. The yield on the French 10-year note advanced eight basis points to 3.05 percent. The 10-year U.S. Treasury yield rose five basis points to 3.39 percent.
To contact the reporter on this story: David Merritt in London on
dmerritt1@bloomberg.net
