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China’s bigger- than-forecast growth in exports

Date: Mon, 14 Feb 2011

and Egypt’s plan to hand power to a democratically elected government. The euro weakened and Spanish bonds fell, while U.S. equities fluctuated.

The MSCI Emerging Markets Index rose 1.3 percent at 12:24 p.m. in New York after the Shanghai Composite Index closed up 2.5 percent. The Standard & Poor’s 500 Index drifted between gains and losses. Wheat climbed to a record in China and copper topped $10,000 a metric ton in London. The euro weakened against 15 of 16 major peers and Spanish 10-year bond yields increased eight basis points to 5.46 percent as Europe’s finance ministers meet to review debt-reduction targets.

The advance in the Shanghai Composite was its biggest of the year after China’s exports jumped 38 percent in January. Egypt’s ruling army council said it aims to transfer power within six months after almost three weeks of unrest ended the 30-year rule of President Hosni Mubarak.

“Yesterday’s announcement is another step toward greater democracy and individual freedoms in Egypt,” said Mohamed El- Erian, the son of an Egyptian diplomat and chief executive officer at Newport Beach, California-based Pacific Investment Management Co. “By dissolving a discredited parliament and suspending a constitution that limits broad-based representation, the council is responding to the transitional demands of the Egyptian people.”

Emerging Markets Rebound

The MSCI gauge of 21 emerging markets recovered more than one-third of last week’s 3.4 percent drop that left the index trading at 13.8 times earnings, the lowest level since August, data compiled by Bloomberg show. The Bombay Stock Exchange’s Sensitive Index rallied 2.7 percent, led by Tata Motors Ltd., the nation’s biggest truckmaker, after profit more than tripled.

The S&P 500 last week closed at the highest level since June 2008 and a valuation of about 15.9 times its companies reported operating earnings, the most-expensive in almost eight months. Wal-Mart Stores Inc., the world’s biggest retailer, lost 1.2 percent today as JPMorgan Chase & Co. cut its recommendation to “neutral” from “overweight.”

President Barack Obama will send Congress a $3.7 trillion budget that would reduce deficits by $1.1 trillion over a decade, setting up a battle with Republicans who have already deemed the plan insufficient to reduce federal debt. The deficit for the current fiscal year is forecast to hit a record $1.6 trillion -- 10.9 percent of gross domestic product -- up from $1.4 trillion the administration estimated previously, according to documents released this morning by the administration.

European Stocks

Three stocks gained for every two that fell in the Stoxx Europe 600 Index, which climbed 0.4 percent. John Wood Group Plc rallied 14 percent after General Electric Co. agreed to buy its well-support division for about $2.8 billion. The MSCI Asia Pacific Index added 1.5 percent, with Japan’s Topix index advancing for a sixth day as the country’s gross domestic product shrank less than expected.

Orascom Construction Industries, Egypt’s biggest publicly traded builder, rose 4 percent in London trading. Commercial International Bank, the largest lender, jumped 7.8 percent. Egypt’s stock exchange has been closed since the end of trading on Jan. 27. Trading, which was due to reopen on Feb. 16, may now start Feb. 20, according to the bourse. The government’s dollar bonds and credit-default swaps were little changed today.

Wheat, Copper

Wheat futures for May delivery surged as much as 2 percent to $9.1675 a bushel on the Chicago Board of Trade. The September-delivery wheat contract on the Zhengzhou Commodity Exchange jumped as much as 3.7 percent to a record 3,110 yuan ($471) a metric ton. Egypt is the world’s biggest wheat importer. Copper jumped 2 percent to $10,159 a metric ton in London on increased imports in China, the world’s largest buyer of industrial metals.

Oil fluctuated between gains and losses in New York. Brent crude for April settlement climbed 2.8 percent to $103.76 a barrel on the London-based ICE Futures Europe exchange. The March contract expired on Feb. 11 at $101.43.

Brent has outpaced New York futures, widening the difference between the prices for April delivery to more than $13 a barrel, as unplanned outages cut European supplies.

The euro depreciated 0.5 percent versus the dollar and 0.7 percent against the yen. The New Zealand dollar slid 0.5 percent versus the U.S. currency after a report showed retail sales fell in December from a month earlier. Australia’s currency advanced against most of its major counterparts after government data showed home loans climbed more than economists forecast.

Europe, U.S. Bonds

The extra yield investors demand to hold Spanish 10-year bonds instead of benchmark German bunds increased eight basis points to 216 basis points, the most in two weeks. The yield on the equivalent-maturity Italian security climbed five basis points to 4.83 percent.

The yield on the two-year Treasury note was little changed at 0.84 percent, about three basis points below an eight-month high, before reports this week forecast to show that the U.S. recovery is taking hold. The Federal Reserve is scheduled to buy $1-$2 billion of Treasury Inflation Protected Securities today as part of its so-called quantitative-easing program.

The cost of insuring against losses on European bank bonds rose, with the Markit iTraxx Financial Index of credit-default swaps rising 7 basis points to 167, the highest since Jan. 31, according to JPMorgan Chase & Co. Ireland’s opposition party said before a meeting of European finance ministers that senior bank bondholders should share the cost of bailing out the country’s financial system.

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