Stocks rose, with the Standard & Poor's 500 Index erasing its decline since Election Day, as investors speculated progress is being made in US budget talks and German investor confidence jumped. Treasuries fell.
The S&P 500 added 0.9 per cent to 1,431.69 at 12:50 p.m. in New York. The Stoxx Europe 600 Index increased 0.3 per cent, holding at an 18-month high, and Germany's DAX Index reached an almost five-year high. Ten-year Treasury yields rose four basis points to 1.65 per cent. Oil fluctuated, while wheat tumbled to a five-month low after government data showed global inventories will shrink less than forecast. Spain's bonds jumped as the government sold more bills than planned at an auction.
The S&P 500 had tumbled as much as 5.3 per cent after the Nov. 6 elections set up a budget showdown between President Barack Obama and the Republican-controlled House. House Speaker John Boehner reiterated his call for Obama to offer proposed spending cuts as part of a deficit-reduction package. Federal Reserve officials begin a two-day meeting to be followed by updated projections on the economy and monetary policy.
"On the surface the rhetoric with the fiscal cliff hasn't changed, but it seems like underneath there's some progress on the actual resolution," James Dunigan, who helps oversee $US112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a phone interview. "We've been dealing with this mountain of uncertainty, and if we can scale that then we have a pretty good-looking future."
US lawmakers need to agree on a budget to prevent more than $US600 billion of automatic tax increases and spending cuts from coming into effect next year.
The S&P 500 climbed for a fifth straight day, matching its longest rally since August, and extended its 2012 advance to 14 per cent. Fed officials are considering whether to supplement $US40 billion a month of mortgage-bond buying with purchases of Treasuries when their Operation Twist program expires at the end of the month.
"The real challenge is at some point in time you're pushing on a string, as you inject all that liquidity into the system," Paul Ballew, chief global economist at Dun & Bradstreet Corp. in Short Hills, New Jersey, said in an interview with Mark Mills on the "Bloomberg - The First Word" radio program today. "The bigger question right now is the fact that after four years of aggressive monetary policy, whether or not anything else will really make a material difference on the direction of the recovery."
Intel Corp., 3M Co. and Microsoft Corp. rose at least 1.9 per cent to lead gains in 29 of the 30 stocks in the Dow Jones Industrial Average. American International Group Inc. rallied 4.9 per cent after the Treasury Department said it is selling its last 234.2 million shares of the insurer, bringing to an end its bailout of the company that fueled resentment against Wall Street.
Apple Inc. advanced 3 per cent as Morgan Stanley reiterated its overweight rating for the world's most valuable company. Delta Air Lines Inc. increased 6.8 per cent after agreeing to buy a 49 per cent stake in Virgin Atlantic Airways Ltd. from Singapore Airlines Ltd.
The seven-day rally for the Stoxx Europe 600 Index is the longest winning streak in 17 months. Suez Environnement Co., Europe's second-biggest water company, rallied 8.3 per cent, the most in three years, after GDF Suez Chief Executive Officer Gerard Mestrallet said his company won't reduce its stake.
Germany's DAX Index increased 0.8 per cent to the highest level since January 2008. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations climbed to 6.9 from minus 15.7 in November, beating the minus 11.5 forecast in a Bloomberg survey of 38 economists.
The German data "shows a clear improvement in sentiment," said Jerome Forneris, who helps manage $US8.5 billion at Banque Martin Maurel in Marseille. "This statistic is closely followed by investors. Germany is the locomotive of Europe.'
KBC Groep NV sank 4.8 per cent as Belgium's biggest bank and insurer by market value sold 1.25 billion euros ($US1.6 billion) of shares. Diageo Plc fell 1.6 per cent after the world's largest distiller ended talks about acquiring Cuervo tequila.
The franc weakened as much as 0.4 per cent against the euro. UBS, Switzerland's biggest bank, said in a notice published on the Swift system yesterday that it would start charging financial institutional clients for cash balances held in Swiss francs from Dec. 21. UBS said charges would be communicated individually to clients within days.
The yield on Spain's two-year note slid 11 basis points to 2.98 per cent as the government exceeded its maximum target at a bill sale and borrowing costs fell.
Italy's 10-year yield dropped 10 basis points and the cost of insuring against default on Italian government debt fell for the first time in six days, with credit-default swaps linked to the nation's bonds losing three basis points to 289.
Bonds of GlaxoSmithKline Plc fell as the U.K.'s biggest drugmaker started marketing its first sale of notes in pounds since 2008. The yield premium over government debt on the London-based company's 700 million pounds ($US1.1 billion) of senior, unsecured 6.375 per cent bonds due March 2039 rose seven basis points to a 2 1/2-month high of 102 basis points.
Carrefour SA, France's biggest retailer, prepared to offer five-year benchmark bonds in euros due 2017.
The MSCI Emerging Markets Index added 0.5 per cent, with benchmark gauges in South Korea, Poland, Israel and Brazil gaining at least 0.4 per cent.
The Shanghai Composite Index fell 0.4 per cent after new yuan loans were less than analysts predicted. Shares in the United Arab Emirates tumbled, with Abu Dhabi's ADX General Index sinking 2.6 per cent and Dubai's DFM General Index slumping 1.5 per cent, led by telecommunications companies as the country set new royalty rates.