CFD Markets News and Forecasts — 10-10-2011

• QE likely to raise prices of corp bonds, equities
• bond buys needed to stop inflation undershoot
• bond buys ease credit conditions, stimulate demand
• MPC shouldn't make credit allocation decisions

European stocks advanced, with the Stoxx Europe 600 Index posting its biggest four-day rally since November 2008, as the leaders of Germany and France gave themselves three weeks to create a plan to recapitalize banks. Angela Merkel and Nicolas Sarkozy, racing to stamp out the sovereign-debt crisis that threatens to engulf the financial system, set an end-of-October deadline to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance.

FTSE 100 5,399      +95.60 +1.80%, CAC 40 3,161      +65.91 +2.13%, DAX 5,847  +171.59 +3.02%     

National benchmark indexes rose in 15 of the 18 western European markets. The U.K.’s FTSE 100 Index gained 1.8 percent. France’s CAC 40 Index climbed 2.1 percent and Germany’s DAX Index jumped 3 percent. All three gauges posted their biggest four-day rallies since 2008.

BP Plc contributed the most to the gauge’s advance. Premier Oil Plc rose 3.3 percent after HSBC Holdings Plc upgraded its shares. Erste Group Bank AG plunged 9.2 percent after saying it will post a full-year loss because of writedowns at its units in Hungary and Romania. Dexia SA dropped 4.7 percent after earlier falling as much as 36 percent when trading in the shares resumed.

Maurel SA rallied 5.5 percent to 13.42 euros. The company said it has found oil sandstones at a well at the Sabanero license in Colombia and oil samples taken have confirmed the field extension to the north east. In a statement, Maurel said it will drill three more wells in 2011 and 2012.

ABB Ltd., the world’s largest maker of power-transmission gear, added 3.5 percent to 16.99 Swiss francs. Jefferies Group Inc. raised its recommendation on the company’s shares to “buy” from “hold.”

Erste Group, eastern Europe’s second-biggest lender, slumped 9.2 percent to 18.80 euros. The bank said it will post a full-year loss of as much as 800 million euros ($1.1 billion) after writedowns at its Hungarian and Romanian units.

Raiffeisen Bank International AG (RBI), eastern Europe’s third- biggest lender, plunged 4.7 percent to 21.20 euros.

The euro rose the most in more than a year against the dollar after French and German leaders pledged to deliver a plan to support banks and repeated a commitment to keep Greece in the single-currency bloc. The shared currency also advanced as Belgium agreed to buy the local consumer-lending unit of Dexia SA, ending a 15-year cross-border experiment with France after the European debt crisis deepened. The euro stayed higher even as a report showed European investor confidence fell to the lowest in more than two years.

The dollar dropped against all of its major counterparts as global stocks advanced, sapping demand for the greenback as a haven.

Currencies of commodity-exporting countries rallied as raw materials gained. Australia’s dollar advanced to the highest level in almost two weeks against its U.S. counterpart, rising to as much as 99.82 U.S. cents before trading up 2.2 percent at 99.79 cents. Canada’s dollar strengthened 1.3 percent to C$1.0257 per U.S. dollar.

The Swiss franc strengthened against the euro by the most since Sept. 5, the day before the Swiss National Bank imposed a ceiling of 1.20 versus the common currency and resumed purchases of foreign currencies to curb the franc’s advance. The franc rose 0.4 percent to 1.2361 per euro and was the best performer among the major currencies. The SNB may raise its ceiling for the franc to 1.30 per euro from 1.20 per euro, according to the private-banking unit of JPMorgan Chase & Co.

U.S. stocks rose, sending the Standard & Poor’s 500 toward its biggest rally in a month, as the leaders of France and Germany pledged a plan to support European banks and stem the region’s debt crisis in three weeks.

Dow 11,380.99 +277.87 +2.50%, Nasdaq 2,557.70 +78.35 +3.16%, S&P 500 1,188.97 +33.51 +2.90%

All 10 groups in the S&P 500 advanced today as gains were led by financial and commodity companies.

Bank of America Corp. and JPMorgan Chase & Co. added more than 4.5 percent. Chevron Corp. and Alcoa Inc. climbed at least 3.1 percent. Caterpillar Inc. and Hewlett-Packard Co. increased more than 3.5 percent, pacing gains in companies most-tied to the economy. Netflix Inc. jumped 4.9 percent after retreating from a decision to split its mail-order DVD service from its Internet streaming.

Sprint Nextel Corp. tumbled 7.7 percent to $2.23 as at least six analysts cut their ratings after the carrier’s investor meeting, citing concerns that rising spending will hurt liquidity.

• European bank stress tests haven't been tough enough
• must have realistic assessment of situation in Greece

Against the backdrop of excitement to the stock and commodity markets in connection with Sunday's statements by the leaders of France and Germany to curb the debt crisis and the recapitalization of the banking sector gold showed strong growth surpassing the four-day highs.

Today the price of December futures for gold has reached $1673.10 per ounce. Currently, the futures price on the Comex in New York is $1665.40 per ounce.

Crude oil climbed to the highest level in two weeks as the leaders of Germany and France pledged to stem the European sovereign-debt crisis. Futures rose as much as 2.3 percent after German Chancellor Angela Merkel and French President Nicholas Sarkozy said yesterday they will deliver a plan to recapitalize the region’s banks and address the Greek crisis by Nov. 3. The euro advanced after Merkel said yesterday in Berlin that European leaders will do “everything necessary” to ensure that banks have adequate capital. The euro gained 1.8 percent to $1.3623. A stronger European currency increases the appeal of raw materials as an alternative investment.

Crude oil for November delivery rose $86.09 a barrel on the New York Mercantile Exchange, the highest level since Sept. 22. Prices climbed 4.8 percent last week, the biggest gain since March. Oil is down 7.2 percent this year.

U.S. stock futures rallied after the leaders of Germany and France pledged a program to support European banks.

Angela Merkel and Nicolas Sarkozy yesterday made yet another pledge to take action to solve the eurozone's debt crisis, saying they would formulate a plan by early next month to recapitalize European banks and accelerate economic coordination in the currency bloc. However, the German and French leaders provided no details, with sources saying they still have to resolve differences over who will pay for the recapitalization and how deeply to restructure Greece's debts.

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