Europe Stocks Rally With Commodities on German Confidence

Bloomberg: European stocks, U.S. index futures and commodities rallied, rebounding from yesterday’s slide, as German business confidence rose more than forecast. The euro weakened to a six-week low and German notes advanced.

The Stoxx Europe 600 Index (SXXP) climbed 1.2 percent at 8:03 a.m. in New York, after sinking the most in two weeks yesterday amid concern the Federal Reserve will scale back stimulus. Standard & Poor’s 500 Index futures and the S&P GSCI Index of 24 raw materials each increased 0.5 percent. The euro fell less than 0.1 percent to $1.3185 and the yield on German two-year government bonds lost four basis points to 0.13 percent as European banks plan to repay less emergency loans than forecast. The Australian dollar gained 0.8 percent.

German business confidence increased to a 10-month high in February, adding to signs that Europe’s largest economy is gathering strength. The European Central Bank said financial institutions will return 61.1 billion euros ($80.5 billion) of its second loan program next week, half the amount estimated by economists. Glenn Stevens, governor of the Reserve Bank ofAustralia, said interest-rate reductions are working.

“Germany is the anchor of Europe,” Tobias Britsch, who helps manage about $34 billion as European equities asset manager at Meriten Investment Management GmbH, said by phone from Dusseldorf, Germany. “After yesterday, when you saw investors getting more nervous and all blame was on Italian elections and on the suggestion the Fed may stop asset purchases, any pullback is definitely an opportunity to buy.”

European Equities

More than 10 shares gained for each one that fell in the Stoxx 600 after the gauge sank 1.5 percent yesterday. Elan Corp. climbed 3.3 percent in Dublin as the drugmaker said it plans to buy back $1 billion of stock after selling its stake in the Tysabri multiple sclerosis treatment to Biogen Idec Inc. Fuchs Petrolub AG rose 4.8 percent as the German lubricant maker reported earnings that beat projections.

The Ifo institute in Munich said its business climate index advanced to 107.4 this month from 104.3 in January. Economists had predicted a reading of 104.9, according to the median of 38 forecasts in a Bloomberg survey.

Even so, the European Commission downgraded its outlook for the euro-area economy today. Gross domestic product in the 17- nation region will shrink 0.3 percent this year, compared with a November prediction of 0.1 percent growth, the Brussels-based commission forecast.

The gain in S&P 500 futures indicated the U.S. gauge will rebound from a two-day, 1.9 percent drop. Hewlett-Packard Co. (HPQ), the largest personal-computer maker, rallied 4.7 percent in pre- market New York trading after the company’s forecast for fiscal second-quarter profit exceeded analyst estimates.

AIG Advances

American International Group Inc., the insurer that repaid a U.S. bailout, gained 4 percent in early trading after reporting an unexpected operating profit.

The MSCI All-Country World Index (MXWD) of equities is still set for a third week of declines, the longest slump since May. China’s government told local authorities to curb real-estate speculation, euro-area services and manufacturing shrank in February and concern grew that the U.S. may curtail stimulus. Italy’s parliamentary election starts on Sunday.

“The market got a little too far, too fast,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees $55 billion, said on Bloomberg Television’s “First Up” with Susan Li. “But at the same time improving economic fundamentals over the course of 2013 and a profit picture that came through earnings looking a little better than what was expected all bode well for stock prices to continue to advance.”

Emerging Markets

The MSCI Emerging Markets Index (MXEF) rose less than 0.1 percent after the gauge’s biggest drop in seven months yesterday erased this year’s gains. Benchmark gauges in Russia,Hungary, the Czech Republic and Thailand rebounded after losing more than 1 percent yesterday. The Shanghai Composite Index retreated 0.5 percent, capping its worst week in 20 months.

Commodities advanced for the first time in five days, after the S&P gauge fell 1.6 percent yesterday, the most since November. Soybeans rose 1.1 percent, the fifth consecutive advance, on increased U.S. exports. Nickel climbed 1.1 percent as the relative strength index slipped to 30 yesterday, the level that indicates to some analysts who study technical charts that a rebound in prices may be imminent.

West Texas Intermediate oil futures for April delivery gained 0.4 percent to $93.17 a barrel in electronic trading on the New York Mercantile, after slumping 4.4 percent during the prior two days.

‘Dramatic Fall’

“We saw a bit of a rebound off that dramatic fall,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong. “With the lack of any significant news we’re seeing a bit of squaring of positions. It’s a dead-cat bounce.”

The euro erased an earlier gain of as much as 0.4 percent against the dollar. Some 356 financial institutions will hand back 61.1 billion euros of ECB loans on Feb. 27, the first opportunity for early repayment of the second Longer Term Refinancing Operations, the central bank said. The median forecast of economists in a Bloomberg News survey was for 122.5 billion euros to be repaid.

In addition, nine banks will return 1.7 billion euros borrowed in the first three-year LTRO. That takes the total amount of funds repaid early to 212.3 billion euros. The ECB flooded financial markets with more than 1 trillion euros in three-year loans a year ago after banks stopped lending to each other because of Europe’s debt crisis.

Australia’s dollar climbed to $1.0329. The RBA’s Stevens endorsed the current level of rates today and said he’d need to be confident the currency is “seriously overvalued” before considering intervention to weaken it. New Zealand’s currency advanced 0.5 percent to 83.83 U.S. cents after a report showed credit card spending rose for a third-straight month in January.

 reporter on this story: Andrew Rummer in London