US stocks rose, rebounding from three days of losses and reversing a worldwide slump, as banks rallied after regulators announced rules to safeguard the global financial system. Commodities fell to the lowest level since January, and bonds of Europe’s most-indebted nations fell.
The Standard & Poor’s 500 Index climbed 0.4 per cent to 1,273.38 at 10.13 am in New York as banks rose the most among 10 industries. The MSCI All-Country World Index of shares added 0.2 per cent after falling as much as 0.4 per cent. The S&P GSCI Index of 24 commodities lost 0.7 per cent as cotton, silver and sugar dropped more than 1.8 per cent. Portugal and Ireland’s 10- year bond yields advanced 24 and 10 basis points, respectively, to record highs.
“Evidence suggests that particularly the US banks are in better position to reach those capital requirements,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $48 billion. “There’s a lot of anxiety about the Greece situation. The progress when dealing with the European debt crisis is slow.”
Global regulators said banks deemed too big to fail must hold as much as 2.5 percentage points in additional capital as part of efforts to prevent another financial crisis. Commodities plunged and Portuguese and Irish bonds fell as Greek lawmakers start a three-day debate to approve a 78 billion euro ($110 billion) austerity package. The nation’s creditors are headed toward an agreement to roll over 70 per cent of their holdings into longer-maturity debt in an effort to prevent a default that may roil the euro region.
Developing nations led losses earlier in equities. The MSCI Emerging Markets Index retreated 0.3 per cent. Benchmark stock indexes for South Korea and Poland lost at least 1 per cent. Measures for Russia and Colombia slumped 0.5 per cent or more.
Equities declined after the Bank for International Settlements said policy makers must raise interest rates to control inflation and may have to act faster than in the past. While policy makers in Asia and Latin America are already boosting borrowing costs to damp price pressures, rates remain near record lows in the world’s largest developed economies.
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Banks led gains in US equities. Bank of America Corp rose 2.2 per cent, PNC Financial Services Group Inc added 1.5 per cent and Citigroup Inc. rallied 1 per cent. In the Stoxx Europe 600 Index, financial shares added less than 0.1 per cent.
The new capital rules from the Basel Committee on Banking Supervision are “less onerous than had been feared,” said Scott Tapley, who helps oversee $2.5 billion at 1st Source Investment Advisors Inc in South Bend, Indiana. “It makes it more likely that they can resume more normal-looking dividend payments sooner rather than later.”
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose 5.5 basis points to 247.5, after earlier reaching a record. Greek, Portuguese and Irish 10- year bonds declined, driving up the extra yield investors demand to hold the securities instead of benchmark German bunds. The Portuguese-German spread widened 22 basis points to a record and the Irish-bund gap jumped to a euro-era high.
The Markit iTraxx SovX WE gauge of default swaps, and contracts tied to Greece climbed 23 basis points to 2,138, signaling an 84 per cent probability of default within five years, according to CMA. Swaps insuring Irish bonds added 27 basis points to an all-time high 832 and Portugal increased 21 to a record 859.
US shares advanced even after American consumer spending unexpectedly stagnated in May. Purchases were little changed, the weakest outcome since June 2010, after a revised 0.3 per cent gain the prior month.