Global stocks rebounded from the biggest drop since July on signs a slump in China’s factory output is easing and America’s housing market is improving. Oil slid as U.S. crude supplies topped forecasts.
The MSCI All-Country World Index climbed 0.1 percent at 2:35 p.m. in New York after tumbling 1.5 percent yesterday. The Standard & Poor’s 500 Index increased 0.1 percent. Oil dropped to the lowest price since July. Ten-year Treasury yields rose one basis point to 1.77 percent, paring an earlier gain of three points. The euro lost 0.2 percent to $1.2965 after German manufacturing and business confidence missed estimates. The pound rose versus 14 of 16 major peers on optimism the U.K. economy pulled out of a recession.
Traders work on the floor of the New York Stock Exchange in New York. Photographer: Scott Eells/Bloomberg
Purchases of new U.S. homes rose in September to the highest level in more then two years as the industry that helped bring on the recession forged its way toward recovery. A survey signaling a smaller contraction in China’s manufacturingboosted confidence in the world’s second-biggest economy is stabilizing.
“The market is trying to focus on positive data after yesterday’s bummer on earnings,” said Malcolm Polley, who manages $1.1 billion as chief investment officer at Stewart Capital in Indiana,Pennsylvania. “Signs of improvement in Chinese manufacturing are important from a global perspective. In the U.S., home data is pointing to at least stabilization.”
Fed Statement
Equities briefly erased gains as the Federal Reserve said growth in employment remains slow and strains in financial markets continue to pose risks to the economy. The central bank’s policy makers said the economy is still growing modestly and unemployment remains elevated as it maintains $40 billion in monthly purchases of mortgage-backed securities aimed at spurring the three-year expansion.
The S&P 500 rebounded after closing yesterday at the lowest level since Sept. 5. Facebook Inc. (FB), the biggest social networking website, surged 20 percent after reporting sales that topped analysts’ estimates, allaying concerns over its ability to make money from mobile ads.
Dow Chemical Co., the largest U.S. chemical maker by sales, climbed 6 percent after saying it will cut about 2,400 jobs and shut 20 manufacturing plants to reduce annual costs by $500 million.
An S&P gauge of 11 homebuilders rallied 1.5 percent. Purchases of new homes in the U.S. climbed 5.7 percent to a 389,000 annual pace in September, topping the median estimate in a Bloomberg survey of 75 economists for an increase to 385,000.
Corning Inc. tumbled 10 percent after reporting earnings, leading a drop in technology shares that briefly dragged the S&P 500 lower. Apple Inc., which reports earnings after markets close tomorrow, was up 0.8 percent, paring a rally of as much as 2.2 percent. Netflix Inc. plunged 12 percent as it cut its forecast for domestic growth.
European Markets
Three shares advanced for every two that declined in the Stoxx Europe 600 Index, which increased 0.4 percent. SAP AG rallied 4.2 percent after the biggest maker of business- management software reported third-quarter software license revenue that beat analyst estimates and boosted a sales forecast. Volvo AB (VOLVB) fell 1.9 percent after the truckmaker’s third-quarter profit missed analyst estimates.
Oil declined 1.1 percent to $85.76 a barrel, the lowest since July, after the U.S. Energy Department said supplies rose three times as much as expected last week, gaining 5.9 million barrels to 375.1 million. An increase of 1.8 million was expected. Gasoline was little changed at $2.56053 a gallon, after falling for a 9th straight day in its longest losing streak in 25 years.
The average nationwide price for regular gasoline at the pump declined 2.3 cents to $3.625 a gallon yesterday, the lowest since Aug. 5, according to AAA, the largest U.S. motoring organization.
Euro Weakens
The euro declined against 13 of its 16 major counterparts, slipping 0.3 percent versus the yen. The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 100.0 this month from 101.4 in September. Economists had predicted an increase to 101.6, according to a Bloomberg survey.
Euro-area services and manufacturing output contracted more than economists forecast in October. A composite index based on a survey of purchasing managers fell to 45.8 from 46.1 in September, London-based Markit Economics said. Economists had forecast a reading of 46.5, the median of 18 estimates in a Bloomberg survey showed. A level below 50 indicates contraction.
Europe Risks
“The weak data today highlighted the risk that the crisis could deteriorate further,” said Matteo Regesta, a senior interest-rate strategist at BNP Paribas SA in London. “Germany, which is a locomotive of growth in the euro region, is slowing and that is not good news for peripheral bonds. It needs growth to get out of the problem.”
The yield on Germany’s 10-year bund lost two basis points to 1.56 percent. The government sold 3.33 billion euros (4.3 billion) of debt due September 2022 after receiving 5.06 billion euros of bids, compared with a maximum 4 billion-euro target.
The Hong Kong Monetary Authority sold the city’s currency for the second day in a week yesterday to halt appreciation and maintain a 29-year-old peg to the U.S. dollar. The currency was at HK$7.7504 versus the greenback, near the top end of its allowed trading range of HK$7.75 to HK$7.85, according to data compiled by Bloomberg.
The MSCI Emerging Markets Index (MXEF) slipped 0.2 percent, with gauges in South Korea,Thailand and the Philippines falling at least 0.6 percent. Russia’s Micex Index lost 0.3 percent, while the Shanghai Composite Index gained less than 0.1 percent. The Hang Seng China Enterprises Index of companies listed in Hong Kong and Hungary’s BUX Index fell at least 1 percent as trading resumed after holidays.
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