By Jae Hur & Rob Verdonck - Mar 25, 2013 2:02 PM GMT+0400
European stocks climbed and Italian bonds erased their decline since the country’s inconclusive elections last month as Cyprus reached an accord with creditors on an international bailout. Bank default risk fell for the first time in seven days and oil rose.
The Stoxx Europe 600 Index advanced 0.9 percent as of 10 a.m. in London, while Standard & Poor’s 500 Index futures added 0.5 percent. Italy’s 10-year bond yield fell as much as eight basis points to 4.43 percent. The euro pared gains against the dollar, while the yen weakened against all of its 16 major peers. Nickel retreated 0.7 percent and West Texas Intermediate oil climbed 0.4 percent.
A financial trader is reflected in a glass wall as he uses a mobile device on the floor of the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg
March 25 (Bloomberg) -- Elena Panaritis, a former member of parliament with Greece's socialist Pasok party, talks about Cyprus' bailout plan and the outlook for the European sovereign debt crisis. She speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Cyprus agreed to the outlines of an aid package, paving the way for 10 billion euros ($13 billion) of emergency loans to stave off the threat of default. The accord imposes losses that two European Union officials said would be no more than 40 percent on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second-biggest, which will be wound down.
“The Cyprus situation is a dramatic situation but it was well managed,” Didier Duret, who oversees about 163 billion euros as chief investment officer of ABN Amro Private Banking in Amsterdam, said in an interview with Francine Lacqua on Bloomberg Television. “It has not turned into a big systemic fear. We’re not in the abnormal years of the big systemic risks that we’ve seen with Greece or Lehman.”
The euro rose after the provisional agreement was struck that would make Cyprus the fifth country to get a rescue since the debt crisis broke out in Greece in 2009. The shared currency fell 0.7 percent against the dollar last week, the most since the five days ended March 1, and tumbled 1.5 percent versus the yen, the most since the week ended Feb. 8.
Stocks Advance
More than seven shares climbed for every one that dropped on the Stoxx 600. Banks contributed the most following the Cypriot agreement, which was forged in overnight talks with euro-area finance ministers in Brussels.
Vodafone Group Plc (VOD) gained 2.5 percent after the Sunday Times reported that the world’ssecond-largest mobile-phone operator has held talks to sell its stake in Verizon Wireless to Verizon Communications Inc. The newspaper cited unidentified bankers and investors. France Telecom SA added 1.6 percent after Chief Executive Officer Stephane Richard told Le Figaro that the company is seeking a partner to help develop its Dailymotion video business.
Futures on the S&P 500 advanced, indicating the benchmark measure will climb following its first weekly decline.
Asian Stocks
Japan’s Topix Index of shares climbed 0.8 percent, rebounding after the first five-day drop in five weeks. Japanese bonds also rose, sending 10-year and 20-year yields to the lowest in almost a decade, on expectations that Bank of Japan Governor Haruhiko Kuroda will use parliament testimony tomorrow to outline new stimulus.
The Hang Seng Index (HSI) gained 0.6 percent in Hong Kong, rallying from losses in the previous two weeks. Thailand’s SET Index rose 2.4 percent, heading for biggest gain since June.
“The uncertainty is out of the way,” Binay Chandgothia, Hong Kong-based fund manager at Principal Global Investors, which oversees more than $280 billion, said in a Bloomberg Television interview. “Stick to equities. We’re looking to add” to an overweight position on Asian shares, he said.
Italian Bonds
Italian bonds advanced for a fourth day. The price of the 5.5 percent securities maturing in November 2022 rose as much as 0.66, or 6.60 euros per 1,000-euro face amount, to 108.755, climbing above the 108.60 closing level on Feb. 22, the last trading day before the elections began.
Spain’s 10-year bond yield fell five basis points to 4.80 percent. The rate on Germany’s 10-year bunds, Europe’s benchmark government bonds, climbed two basis points to 1.40 percent.
The yield on the 10-year Treasury note climbed three basis points to 1.95 percent.
The euro was little changed at $1.3009, after reaching $1.3048, the strongest level since March 15. It rose 0.4 percent to 123.17 yen, paring an advance of as much as 0.9 percent. Japan’s currency depreciated 0.3 percent to 94.75 per dollar.
China’s yuan strengthened beyond 6.21 per dollar for the first time in 19 years after the central bank raised the currency’s reference rate. The Indian rupee rose 0.4 percent to 54.1100 per dollar after the government removed sub-limits governing foreign investment in the nation’s bonds. Overall caps of $25 billion for sovereign debt and $51 billion for corporate notes were left unchanged.
The cost of insuring against default on bank debt dropped from the highest in four months, with the Markit iTraxx Senior Financial index of credit-default swaps linked to 25 banks and insurers falling five basis points to 171 basis points.
Emerging Markets
The MSCI Emerging Markets Index (MXEF) added 1 percent to 1,025.81, the biggest gain since Jan. 2 on a closing basis. Hungarian stocks led gains among the major emerging markets in Europe.
Russia’s Micex Index (INDEXCF) rose 0.8 percent, heading for the biggest gain since March 11, as the price of oil increased, boosting OAO Gazprom and OAO Rosneft, the country’s biggest energy producers.
The S&P GSCI gauge of 24 commodities advanced 0.2 percent, the second consecutive advance. WTI rose to $94.12 a barrel and nickel fell to $17,026 a metric ton. Copper declined 0.3 percent to $7,635.50 a ton.
Natural gas futures snapped three days of losses to trade near $4 per million British thermal units in New York. The contract for April delivery advanced 3 cents, or 0.7 percent, to $3.96 on the New York Mercantile Exchange. U.K. natural gas for same-day delivery fell for the first time since March 15 as the network manager forecast an oversupply.
To contact the reporters on this story: Rob Verdonck in London at rverdonck@bloomberg.net; Jae Hur in Tokyo at jhur1@bloomberg.net.
To contact the editors responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net; Rocky Swift at rswift5@bloomberg.net.
