Stocks, Commodities Rally, Treasuries Drop on G-20, Retail Data

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October 14, 2011, 5:24 PM EDT By Michael P. Regan and Rita Nazareth

Oct. 14 (Bloomberg) -- Stocks gained, extending the biggest weekly rally since July 2009, as the Group of 20 began talks to tame Europe’s debt crisis and U.S. retail sales and Google Inc.’s results beat estimates. Commodities rose and the euro completed the largest weekly advance versus the dollar since March 2009.

The MSCI All-Country World Index rose 1.4 percent, extending its weekly gain to 5.5 percent. The Standard & Poor’s 500 Index jumped 1.7 percent to 1,224.58, the highest level since Aug. 3. Google jumped 5.9 percent, rising a ninth straight day. Copper increased 3.1 percent as the S&P GSCI Index of materials climbed 2.4 percent today and 5.2 percent this week, its best advance of the year. Ten-year Treasury note yields rose six basis points to 2.25 percent. The euro was at $1.3881, up 3.8 percent this week.

Equities rallied as elements of the European rescue plan emerged with finance officials from the G-20 beginning talks in Paris. The bigger-than-forecast 1.1 percent increase in U.S. retail sales last month eased concern that slumping consumer confidence will hurt spending, while Google’s earnings showed growing demand for online advertising.

“The economy seems to be re-accelerating as the various threats to growth moderate,” David Goerz, the San Francisco- based chief investment officer at Highmark Capital Management Inc., which oversees $17.2 billion, said in an e-mail.

Debt Turmoil

Policy makers are discussing an expansion of the International Monetary Fund’s role as part of a global G-20 agreement next month in Cannes, France, according to three officials, who declined to be identified because the discussions are not public. Talks are in preliminary stages as potential contributors wait to see what measures Europeans take to end the debt turmoil at an Oct. 23 summit, they said.

European officials were said to consider writedowns of as much as 50 percent on Greek bonds, people familiar with the discussions said.

The S&P 500 capped its first back-to-back weekly gain since July. Apple Inc. rose 3.3 percent as analysts predicted it will sell as many as 4 million new iPhone 4S devices this weekend as customers around the world lined up. Energy companies led gains among 10 S&P 500 industries, climbing 3.6 percent. Technology companies added 2.1 percent.

The better-than-forecast growth in retail sales helped the Citigroup Economic Surprise Index for the U.S. turn positive for the first time since April 29, the day the S&P 500 peaked at an almost three-year high. A positive reading in the index signals that data has collectively exceeded estimates over the past three months.

Consumer Confidence

U.S. equities maintained gains even after the Thomson Reuters/University of Michigan preliminary October index of consumer sentiment fell to 57.5 from 59.4 a month earlier, the group reported today.

The S&P 500 has rebounded more than 11 percent from a 13- month low on Oct. 3 and today rose above levels where rallies stopped in August and September. The gauge closed at 1,218.89 on Aug. 31 before dropping 4.4 percent in the next three sessions, and ended at 1,216.01 on Sept. 16 before losing 7.1 percent by Sept. 22. The index has fluctuated intraday between a high of 1,230.71 and a low of 1,074.77 since Aug. 5.

‘Clear That Hurdle’

"It would be pretty important to break that trading range," Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. "Even as we had this robust rally, it hasn’t drawn the technicians to have conviction in buying. If we crack through this 1,230 area, then they are going to say -- it’s clear that hurdle."

Corporate profits are calming U.S. stock investors more than any time in 19 years, reducing the cost of insurance against losses at the same time investors gain confidence in European efforts to solve the debt crisis.

The Chicago Board Options Exchange Volatility Index fell 28 percent in the six trading sessions before New York-based Alcoa Inc. posted results, a record drop before the start of earnings season, according to data since January 1993 compiled by Bloomberg. The VIX , as the benchmark measure of U.S. equity derivatives is known, fell 6.6 percent through yesterday since Alcoa’s earnings trailed analyst estimates Oct. 11.

The Stoxx Europe 600 Index rose 0.8 percent and climbed 2.8 percent in five days for a third straight weekly gain, its longest stretch since April. SAP AG increased 2.1 percent after the largest maker of business-management software said earnings and sales rose in the third quarter on rising demand for its services. SAP also reiterated its full-year forecast.

All 19 industry groups in the Stoxx 600 advanced except for banks, which slipped after Fitch Ratings put more than a dozen lenders on watch negative as part of a global review. BNP Paribas SA dropped and Societe Generale SA fell more than 3 percent.

Italy Confidence Vote

Italy’s FTSE MIB Index rallied 2.5 percent to lead gains among European nations and the 10-year bond yield lost two basis points to 5.80 percent, according to generic rates. Prime Minister Silvio Berlusconi won a parliamentary confidence vote today to avert the collapse of his government, giving him more time to try and steer Italy out of Europe’s debt crisis.

Spain’s 10-year note yield climbed four basis points to 5.24 percent after. The extra yield investors demand to hold French 10-year bonds instead of benchmark German bunds widened eight basis points to 93 basis points, the most since the euro started in 1999. The Belgian two-year note yield increased 10 basis points to 2.52 percent.

The cost of insuring European sovereign debt rose after S&P said it was downgrading Spain because of slowing growth and concern rising defaults will undermine banks. The Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments gained 3.4 basis points to 337.

Copper Rallies

Copper rallied 3.1 percent to $3.4085 a pound in New York and is up 4.1 percent in five days, its biggest weekly gain since July. Stockpiles in London Metal Exchange warehouses decreased for an eighth day to the lowest level since April 13. Copper imports by China climbed for a fourth month to the highest level in 16 months in September, according to customs data.

Shares of Freeport-McMoRan Copper & Gold Inc. gained as Morgan Stanley said in a note that stabilizing copper inventories worldwide and rising demand from China are “favorable” for the world’s largest publicly traded producer of the metal.

Oil for November delivery climbed 3.1 percent to $86.80 a barrel, a three-week high, on the New York Mercantile Exchange, reversing an early decline.

The MSCI Emerging Markets Index rose 0.5 percent, heading for its eighth consecutive gain, the longest streak since July 2010.

Hong Kong, Russia

The Hang Seng China Enterprises Index of Chinese shares traded in Hong Kong fell 2.2 percent. The National Bureau of Statistics said consumer prices rose 6.1 percent in September from a year earlier, the fourth consecutive month of inflation above 6 percent. China’s money supply grew at the slowest pace in almost a decade as inflation stayed above the government’s target, highlighting the risk that efforts to tame prices will trigger a slowdown.

The Micex Index jumped 3.1 percent in Moscow as oil rose. The ISE National 100 Index rose 1.3 percent in Istanbul and the Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 1.2 percent.

The euro rose 1.2 percent to 107.17 yen, which retreated against all 16 major currencies as investors pursued riskier assets. Australia’s dollar and the Mexican peso led currencies that strengthened versus the euro. The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.5 percent.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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