Euro Strengthens as Stocks, Commodities Gain on Greek Aid Plan

By Patrick Chu
April 12 (Bloomberg) -- The euro gained for a third day against the dollar, stocks climbed and commodities rose after European governments unveiled a plan to halt Greece’s fiscal crisis. Treasuries declined and credit-default swaps plunged.
Europe’s currency strengthened 1 percent against the dollar to $1.3649 at 4:12 p.m. in Tokyo and rose versus all 16 of its most-traded counterparts. The MSCI World Index added 0.4 percent, and Standard & Poor’s 500 Index futures advanced 0.2 percent. The Stoxx 600 increased 0.1 percent. Copper gained 0.6 percent and oil rose 0.3 percent. Shares in Thailand plummeted following anti-government riots in Bangkok that killed 21.
Euro-region finance ministers pledged as much as 45 billion euros ($61 billion) in loans at below-market interest rates to help rescue debt-plagued Greece and restore confidence in the European currency, which weakened 4.8 percent against the dollar this year. The bailout, combined with expectations of faster economic growth in India and South Korea, improved investor sentiment in Asia, where the MSCI Asia Pacific Index rose 0.2 percent to 128.45.
"The development in Greece is giving market sentiment a boost because it eases concerns of a default among European nations facing debt problems," said Olan Caperina, a fund manager at Bank of the Philippine Islands, which manages $9.7 billion. "Investors have reasons to turn positive and put money into the markets."
Europe’s currency rose 1.2 percent to 127.37 yen and the Danish, Swedish, Swiss and Norwegian currencies led gains, all strengthening more than 0.7 percent versus the yen. Poland’s zloty declined against the euro as the nation’s president and central bank chief died in a weekend plane crash.

Below-Market Loan

European nations and the International Monetary Fund pledged to provide three-year loans with a rate of about 5 percent, compared with 6.98 percent on Greek three-year securities.
Greek bonds may climb and the gains may cut the yield premium investors demand to hold Greek 10-year debt instead of benchmark German bunds.
"This is very positive," said David Keeble, head of fixed-income strategy at Credit Agricole Corporate and Investment Bank in London. "We have got some concrete numbers and that is just what the market wanted. I would be all over Greek bonds after this. The market will not get down to 5 percent, but it will trade close to that. Maybe about 50 basis points above."
The European agreement, aimed at stopping Greece’s financial distress from infecting the rest of the region, damped concerns about the viability of the euro, which was created in 1999. The pact also may remove an impediment to the global economic recovery now being led by Asian nations.

Won Climbs

South Korea’s won rose 0.5 percent to 1,113.05 per dollar, as the central bank raised its economic growth forecast and a rescue package for Greece boosted demand for higher-yielding assets.
Copper in London traded near the $8,000-a-ton level as the dollar declined and after China’s imports surged in March on rising seasonal demand. The metal for delivery in three months gained to as much as $8,043.75 a metric ton before trading at $7,978.75. Aluminum advanced 0.7 percent to $2,422 a ton.
Oil rose for the first time in four days, to $85.27 a barrel, as the dollar fell and China increased crude imports to meet surging demand.
"China is playing a key role in underpinning global demand for commodities, including crude," said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. "The Greek rescue plan, which is going to be driving the markets today, resolves a lot of the uncertainty. A weaker dollar is a supportive element for oil prices."
Advancing stocks beat decliners by more than three to one on the MSCI Asia Pacific Index, where industrials and commodity producers rallied. Japan’s Nikkei 225 Stock Average increased
0.4 percent.
BHP Billiton Ltd., the world’s largest mining company, gained 1.2 percent to A$44.41, Mitsubishi Corp., Japan’s largest commodities trader, climbed 1.6 percent to 2,480 yen.
Nintendo Co., a game maker that gets 34 percent of its revenue in Europe, increased 4 percent to 31,550 yen in Osaka.
Toyota Motor Corp., the Japanese carmaker that gets 31 percent of its revenue in North America, rose 0.5 percent to 3,725 yen after U.S. wholesale inventories climbed more than estimated.
Futures on the Standard & Poor’s 500 Index climbed following the index’s 0.7 percent advance on April 9 to the highest close since September 2008. Inventories at U.S.
wholesalers rose 0.6 percent in February, suggesting businesses are ramping up orders, a Commerce Department report showed.
Economists had estimated a 0.4 percent increase.

Thai Stocks

The Stock Exchange of Thailand index plunged 5.1 percent, the biggest drop in six months, after a clash between soldiers and protesters left as many as 21 people dead. Overseas investors sold a net 3.2 billion baht ($99 million) of Thai equities in the past two trading days, the most since Feb. 8, ending 31 days of buying.
"Some overseas investors will be so jittery that they may rush to reduce their investments," said Vana Bulbon, chief executive officer of UOB Asset Management (Thailand) Co., which oversees $1.6 billion. "No one expected that many deaths and this situation further worsens the political crisis."
Treasury Yields
Investors sought higher-yielding assets. The two-year Treasury note yield rose three basis points to 1.09 percent in Tokyo, according to data compiled by Bloomberg.
The cost of protecting Asia-Pacific bonds from default declined as the European rescue package for Greece helped calm investors, according to traders of credit-default swaps.
The Markit iTraxx Australia index dropped 7 basis points to 77.5 basis points in Sydney, according to Citigroup Inc. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan declined 7 basis points to 89 in Singapore, Citigroup prices show. Both risk benchmarks are at their lowest since Jan. 12, according to CMA DataVision in New York. The Markit iTraxx Japan index fell 5 basis points to 90 in Tokyo, its lowest since June 2008, Deutsche Bank AG and CMA prices show.
The zloty fell 0.3 percent to 3.8806 per euro after the weekend plane crash that killed Poland’s president and central bank chief. It gained 0.7 percent to 2.8457 per dollar.
President Lech Kaczynski, central bank Governor Slawomir Skrzypek and leaders of the opposition and military were among
96 people who died en route to commemorate the Soviet massacre of 22,000 Polish officials near Russia’s Katyn forest.