Stocks, Euro Gain on Greek Backing; UBS Slides on Trading Loss

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September 15, 2011, 7:10 AM EDT By Stephen Kirkland and Shiyin Chen

Sept. 15 (Bloomberg) -- Stocks gained for a third day, the euro strengthened and Greece’s bond yields fell after German and French leaders reiterated support for the country. UBS AG tumbled after reporting a $2 billion trading loss.

The MSCI All-Country World Index jumped 1 percent at 6:40 a.m. in New York. The Stoxx Europe 600 Index rose 1.6 percent even as UBS sank 7.9 percent. Standard & Poor’s 500 Index futures climbed 0.5 percent. The euro appreciated against 12 of its 16 major peers, and the yield on the Greek two-year note tumbled more than 400 basis points. Spanish 10-year yields rose four basis points to 5.40 percent, approaching a month high, as the country sold 3.95 billion euros ($5.4 billion) of bonds.

French President Nicolas Sarkozy and German Chancellor Angela Merkel said yesterday they’re convinced Greece will stay in the euro area as the region’s debt crisis spreads. Spain, France, the U.K. and Sweden are selling bonds today. U.S. inflation probably eased and industrial output stalled, economists said before reports from the Labor Department and Federal Reserve.

“Sentiment has improved tangibly following Merkel and Sarkozy’s reassurances yesterday evening that Greece would remain in the European Monetary Union,” Jane Foley, a senior foreign-exchange strategist at Rabobank International in London, said in a report today. “That said, it seems that the eurozone debt crisis is no nearer a solution than it was last week and consequently, despite today’s better tone, it is fair to expect the market to remain in a very jittery mood.”

Kingfisher, UBS

The Stoxx 600 advanced for a third day as all 19 industry groups gained. Kingfisher Plc climbed 4.8 percent as Europe’s largest home-improvement retailer reported profit that beat estimates. Hennes & Mauritz AB rallied 5.6 percent after the clothing retailer’s sales were better than anticipated.

UBS sank as much as 9.6 percent after the biggest Swiss lender said it may be unprofitable in the third quarter because of the loss from unauthorized trading at its investment bank. The London police said today they arrested a 31-year-old man in connection with the probe.

The gain in S&P 500 futures indicated the index will extend a three-day rally. U.S. data today may show consumer prices rose 0.2 percent in August from July, when inflation was at 0.5 percent, according to the median forecast in a Bloomberg News survey. Other reports may show manufacturing contracted in the New York and Philadelphia regions this month and first-time jobless claims were at a level last week that indicates limited improvement in the job market.

Euro, Franc

The euro rose 0.4 percent against the yen. The Dollar Index, which tracks the U.S. currency against those of six trading partners, declined 0.4 percent. The Swiss franc fell against most major peers as the nation’s central bank repeated that it will defend the currency’s level with the “utmost determination.” The Swiss National Bank imposed a franc ceiling of 1.20 against the euro on Sept. 6.

New Zealand’s dollar declined versus all but two of its 16 most-traded peers after the central bank left interest rates unchanged and signaled no urgency to raise them until the global recovery strengthens.

The yield on the Greek two-year note sank almost 7.5 percentage points over the past two days after it rose yesterday to a euro-era record of 84.52 percent. The cost of insuring government bonds fell for a third day, with the Markit iTraxx SovX Western Europe Index of credit-default swaps declining 5 basis points to 338, compared with a record 353 on Sept. 12.

The yield on the 10-year Treasury note advanced seven basis points to 2.05 percent, climbing for a third time in four days.

Gold for immediate delivery slid 0.7 percent to $1,807.85 an ounce in London trading. Silver dropped 0.7 percent to $40.41 an ounce. Copper for three-month delivery rose 1.1 percent on the London Metal Exchange, rebounding from a one-month low.

The MSCI Emerging Markets Index rallied 1 percent, snapping a four-day slump that sent it to the lowest close since July 2010. Taiwan’s Taiex Index jumped 2.2 percent. Poland’s WIG20 Index advanced 1.4 percent as KGHM Polska Miedz SA, the country’s only copper producer, gained the most in a week. The Micex Index of Russia rose 2.2 percent.

--With assistance from John Deane, Abigail Moses, Andrew Rummer, Daniel Tilles and Jason Webb in London. Editors: Stephen Kirkland, Justin Carrigan

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net;

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net

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