Europe Stocks Gain as Asia Shares Fall While Bonds Rise

Bloomberg: European stocks rose, erasing Friday’s losses, and bonds rallied as euro-area finance ministers prepared to meet. Shares and currencies in Asia declined after a U.S. jobs report last week added to the case for the Federal Reserve to reduce economic stimulus.

The Stoxx Europe 600 Index gained 1.5 percent to 292.55 at 8:24 a.m. in New York after losing 1.3 percent on July 5. Standard & Poor’s 500 Index (SPX) futures added 0.6 percent while the MSCI Asia Pacific Index slid 1.5 percent. The yield on 10-year Portuguese debt slipped 13 basis points to 7 percent. U.S. Treasuries rose after 10-year yields surged to a near two-year high. South Korea’s won weakened 0.9 percent against the dollar. Egyptian shares tumbled the most in three weeks.

Finance ministers are expected to discuss aid to Greece and European Central Bank President Mario Draghi is scheduled to speak in Brussels today. U.S. stocks extended gains after European markets closed on Friday as better-than-estimated jobs data overshadowed concern the Fed will reduce stimulus. Alcoa Inc. will start the second-quarter U.S. earnings season, reporting results after the market closes in New York today.

“The world looks rosy to investors again, after the U.S. market rallied on much better-than-expected employment numbers that investors finally seem to be interpreting as good news,” said John Plassard, who helps oversee $28 billion as vice president at Mirabaud Securities LLP in Geneva. “With analysts having downgraded their expectations in recent weeks, we should be seeing fewer negative surprises in the U.S. earnings season, so sentiment is quite good before Alcoa reports numbers.”

Stock Losses

Global equities lost more than $3.8 trillion in value and U.S. Treasury yields climbed to an almost two-year high since Fed Chairman Ben S. Bernanke signaled May 22 that the central bank’s asset-buying program could be tapered should the job market continue to improve. The purchases, currently at $85 billion a month, helped the MSCI World Index rally 18 percent in the past year.

European stocks rebounded with trading 27 percent less than the 30-day average. Siemens AG jumped 5 percent as Osram Licht AG traded for the first time following a spinoff from the German engineering company. Siemens’s former lighting unit fell 1.7 percent after opening at 24 euros.

Lloyds Banking Group Plc (LLOY) added 2.8 percent after a person with knowledge of the matter said former Standard Chartered Plc Chairman Mervyn Davies is assembling a group of investors to bid for part of the U.K. government’s stake in the mortgage lender. The Sunday Times reported that Singapore’s state-owned investment company made a preliminary approach about buying a 10 percent stake in Lloyds. Temasek said it does not comment on speculation.

Portas Named

Portugal’s PSI 20 Index climbed 1.9 percent. The country’s prime minister named Paulo Portas, the leader of the junior party in the governing coalition, as vice premier. The appointment helps cement a deal to hold the coalition together.

Egypt’s main gauge fell 3.5 percent. Supporters of deposed President Mohamed Mursi clashed with the military today outside a main security installation, in violence that authorities said killed at least 42 people.

The MSCI Emerging Markets Index fell 1.1 percent, extending this year’s decline to 14 percent, compared with an 8.5 percent advance for the MSCI World gauge of developed nation shares. Benchmark indexes in Shanghai, Indonesia, Thailand and thePhilippines lost more than 2.5 percent.

Emerging Currencies

India’s rupee, the Philippine peso, Malaysian ringgit and Thai baht declined at least 0.5 percent. Turkey’s lira rallied 1.1 percent from a record low as the central bank offered $500 million at currency auctions and said it would start “strong” monetary tightening.

U.S. 10-year yields declined two basis points to 2.72 percent after touching 2.75 percent earlier today, the highest since August 2011. Volatility in Treasuries as measured by the Bank of America Merrill Lynch MOVE Index rose to 117.89 on July 5, the highest since December 2010. The index has averaged 64.26 this year.

Australia’s 10-year bond yield climbed eight basis points to 3.90 percent.

Greek 10-year bonds rose for a second day, pushing the 10-year yield 37 basis points lower to 10.95 percent. A mission of the European Commission, European Central Bank andInternational Monetary Fund that oversees euro-area bailouts reached a “staff-level agreement ad referendum” on the Greece government’s implementation of the terms of its rescue agreement, the commission said in a statement today.

Eurogroup Review

“The Eurogroup and the IMF’s Executive Board are expected to consider the request for approval of the review in July,” according to the statement.

The cost of insuring against losses on corporate bonds decreased with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies dropping 3.3 basis points to 110.5, the lowest since June 19.

The euro gained 0.2 percent to $1.2850. Sweden’s krona extended a decline after a report showed the country’s industrial production unexpectedly fell in May. The krona weakened 0.6 percent to 6.8445 per dollar and 0.7 percent to 8.7906 per euro.

Silver jumped 1.4 percent and aluminum advanced 0.9 percent. Gold rose 0.9 percent to $1,234.48 an ounce and West Texas Intermediate oil slipped 0.4 percent to $102.84 a barrel. Oil trading in New York was about 70 percent above the average for the past 100 days, according to data compiled by Bloomberg.

reporters on this story: Stephen Kirkland in London