Asian stocks snapped a three-day loss, while U.S. stock futures and oil surged after President Barack Obama said Congressional leaders reached an agreement to raise America’s debt ceiling. The yen, Swiss franc and Treasuries fell.
The MSCI Asia Pacific Index rose 1.5 percent as of 11:15 a.m. in Tokyo, set for the biggest gain since June 29. Standard & Poor’s 500 futures advanced 1.5 percent, indicating the gauge will rebound from three straight monthly losses. The U.S. dollar climbed 1.2 percent against the yen and 0.9 percent versus the Swiss franc. Ten-year Treasury yields jumped three basis points. Oil rose 1.3 percent in New York, while gold fell from a record.
Leaders of the Republican and Democrat parties have reached an agreement that will “reduce the deficit and avoid default,” Obama said in remarks at the White House. The plan would raise the $14.3 trillion debt ceiling by $2.1 trillion, sufficient to serve the nation’s needs through 2013. Stocks also rallied after data showed China’s manufacturing growth and South Korean exports beat analyst estimates, and as companies including Mitsubishi UFJ Financial Group Inc. posted higher profits.
“They are going to pull a rabbit out of the hat,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a telephone interview before Obama’s comments. His firm manages $275 billion. “The word default that’s being thrown around is being used inappropriately. I don’t think the U.S. in any way, shape or form is going to default. The collateral damage would be calamitous.”
U.S. INDEX Futures
S&P 500 futures indicate the gauge will rebound from last week’s 3.9 percent slump, the worst weekly loss in more than a year. Dow Jones Industrial Average futures rose 173, or 1.4 percent, to 12,261. The average sank 4.7 percent in the previous six days. Yields on 10-year Treasuries rose to 2.82 percent, after plunging to as low as 2.77 percent last week.
Congressional leaders are preparing to sell to members the deal to cut $917 billion in spending over a decade, raising the debt limit initially by $900 billion, and to charge a special committee with finding another $1.5 trillion in deficit savings by the year’s end. They confront an Aug. 2 deadline for approval.
Senate Majority Leader Harry Reid endorsed the accord among Republican leaders and the Obama administration even as negotiators were working out the final details. Senate Minority Leader Mitch McConnell told senators tonight that the U.S. will not default on its obligations.
Yen, Swiss Franc
The yen weakened against all of its major counterparts as gains in stocks reduced demand for lower-yielding, haven currencies. The New Zealand dollar reached a record high on improved prospects for the nation’s exports after data showed faster-than-estimated manufacturing in China. The euro fell against 13 of its 16 major peers before Spain sells bonds this week amid concern Europe’s sovereign debt crisis will linger.
“It’s been the focus of the market on whether lawmakers could reach an agreement, so the clearer direction is a positive,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third-largest bank by market value. “The dollar is being bought, and the yen is being sold, with improved sentiment.”
The dollar jumped to 77.57 yen as of 11:44 a.m. in Tokyo from 76.76 yen on July 29 in New York, a record low for a closing level. It climbed to 79.29 Swiss centimes from 78.55 last week, when it touched the weakest-ever level of 78.51. The greenback traded at $1.4384 per euro from $1.4398.
The euro jumped 0.8 percent to 1.14053 Swiss francs after touching a historic low of 1.12724 francs. The 17-nation currency advanced 1 percent to 111.66 yen. The New Zealand dollar, known as the kiwi, reached 88.44 U.S. cents, the most since it was freely floated in 1985, before buying 88.17 U.S. cents, from 87.93 cents last week.
The South Korean won strengthened 0.5 percent to 1,049.20 per dollar, approaching a three-year high. Economic reports today showed consumer prices rose 4.7 percent last month from a year earlier, after having climbed 4.4 percent in June, while exports increased 27.3 percent from a year earlier in July.
China’s Purchasing Managers’ Index was at 50.7 for July, compared with 50.9 in June, the China Federation of Logistics and Purchasing said in a statement today. The reading beat every forecast in a Bloomberg News survey of 13 economists.
About 10 shares rose for every one that declined on MSCI’s Asia Pacific Index, helping the gauge rebound from a 1.6 percent weekly loss. Japan’s Nikkei 225 Stock Average increased 1.8 percent, while South Korea’s Kospi index and Australia’s S&P/ASX 200 Index both climbed 1.8 percent.
Mitsubishi UFJ rallied 5.1 percent after Japan’s biggest publicly traded bank said first-quarter profit tripled to a record. Of 257 companies in the Asia-Pacific gauge to have reported net income from July 11 through 9 a.m. Tokyo time today, 115 had surpassed analysts’ estimates while 88 had fallen short, according to data compiled by Bloomberg.
HTC Corp. (2498) climbed 1.1 percent in Taipei after Asia’s second-largest phone maker by market value forecast third- quarter revenue that topped the average analyst estimate in a Bloomberg survey. Macarthur Coal Ltd. (MCC) rose 1.5 percent after saying BidCo has advised that it intends to make an offer for a controlling stake in the Australian coal producer.
The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment decreased, with the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan falling 2.5 basis points to 113.5 basis points, Credit Agricole CIB prices show. That will be the lowest close since July 7, CMA data show.
The Markit iTraxx Australia index dropped 4 basis points to 114.5 basis points, Nomura Holdings Inc. prices show, while the Markit iTraxx Japan index decreased 2 basis points to 117.5 basis points, Citigroup Inc. prices show.
Crude for September delivery rose to $97 a barrel on the New York Mercantile Exchange, rebounding from a 4.2 percent plunge last week that drove prices to the lowest settlement in about two weeks. Brent oil jumped 1.3 percent to $118.29 a barrel on the London-based ICE Futures Europe exchange.
Gold for immediate delivery declined 1 percent to $1,611.65 an ounce after reaching an all-time high of $1,632.80 an ounce on July 29. Bullion advanced 8.5 percent last month on concern the sovereign-debt crises in the U.S. and Europe may derail the global recovery. Cash silver fell 1.3 percent to $39.365.
Copper for delivery in three months gained as much as 0.7 percent to $9,894 a metric ton on the London Metal Exchange. The metal reached $9,895 a ton on July 29, the highest level since April 11. December-delivery wheat climbed 0.9 percent to $7.22 a bushel and corn increased 0.8 percent to $6.7425 a bushel on the Chicago Board of Trade.
Commodities beat stocks, bonds and the dollar for the first time in three months in July, as expectations that China’s booming economy will spur demand for raw materials outweighed the debt crises in the U.S. and Europe. S&P’s GSCI Total Return Index of 24 raw materials gained 2.4 percent, ending two months of losses.