Thursday, 10 November 2011

Euro Strengthens, Italian Bonds Rise Before Auction; Stocks Erase Losses

The euro rebounded, stocks pared losses and Italy’s bonds rallied as the European Central Bank bought the country’s debt before today’s auction. U.S. index futures and oil advanced.

The yield on Italy’s 10-year bonds dropped 14 basis points at 9:24 a.m. in London, while the euro strengthened 0.2 percent to $1.3571 after falling as much as 0.4 percent. The benchmark Stoxx Europe 600 Index slipped 0.1 percent after sinking as much as 1.7 percent. Futures on the benchmark Standard & Poor’s 500 Index advanced 0.8 percent. The S&P GSCI index of 24 commodities climbed 0.4 percent, with oil in New York up 1 percent.

Italy will seek to sell 5 billion euros ($6.8 billion) of Treasury bills today after yields on 10-year notes surged past the 7 percent level at which Greece, Ireland and Portugal sought international bailouts. German Chancellor Angela Merkel’s Christian Democratic Union may adopt a motion at a party congress next week to allow euro members to exit the currency area, a senior CDU lawmaker said. More than $1 trillion was erased from the value of global equities yesterday.

“Uncertainties still linger as to the political situation going forward and the capacity of bailout mechanisms to restore a more robust equilibrium,” Sean Maloney, a strategist at Nomura International in London, wrote in a note. “The wildcard in the process remains the ECB and the scope for greater utilization of its balance sheet and the implications of a change in stance here could, in the short term at least, be significant.”

The Italian two-year note yield slid 25 basis points, after jumping 82 basis points yesterday. The additional yield investors demand to hold 10-year French, Spanish, Austrian and Belgian bonds instead of benchmark German bunds rose earlier to euro-era records amid concern the region’s debt crisis is spreading.

The MSCI Asia Pacific Index declined 3.3 percent, the most since Sept. 22. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong tumbled 5.7 percent as China’s export growth slowed.

To contact the reporter on this story: Stephen Kirkland in London at
To contact the editor responsible for this story: Stuart Wallace at