Stocks rally, u.S. Futures jump on fed outlook; bonds decline

Stocks rose for a fourth day on speculation the Federal Reserve will stimulate economic growth as U.S. unemployment stays above 9 percent. European government bonds fell and the Swiss franc strengthened.

The MSCI All-Country World Index gained 0.6 percent at 6:07 a.m. in New York, trimming the biggest monthly drop since May 2010. The Stoxx Europe 600 Index advanced 1.3 percent and futures on the Standard & Poor’s 500 Index climbed 0.9 percent. The Swiss franc appreciated against all 16 of its major counterparts tracked by Bloomberg. Copper rose for a sixth day while oil headed for its biggest monthly drop since May.

U.S. companies probably added fewer jobs in August than July even as factory orders climbed, data may show today. Some Fed officials favored a “more substantial move” beyond an Aug. 9 pledge to hold rates at record lows for two years, according to minutes of policy makers’ latest meeting published yesterday. German unemployment fell in August for a 26th month and retail sales unexpectedly held steady in July, reports showed.

“Most people will be glad to say goodbye to this month,” Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., told Susan Li on Bloomberg Television’s “First Up.” “Investors are well aware that it’s going to be a slow, stubborn recovery. We’re hoping we remain in positive growth mode. The good news is that a lot of the bad news is already reflected in the price.”

Stocks Gain

The Stoxx 600 advanced for a third day, paring this month’s decline to 12 percent. Bouygues SA, the French construction company that also runs telecoms and media operations, jumped 12 percent after announcing a buyback and raising its sales target. UPM-Kymmene Oyj, Europe’s second-biggest papermaker, rallied 8.5 percent after saying it will close mills in Finland and Germany.

The gain in S&P 500 futures indicated the gauge will climb for a fourth day. It has tumbled 5.8 percent this month, the most since May 2010. The MSCI World Index has lost 7.7 percent.

U.S. factory orders probably rose 2 percent in July after a 0.8 percent decline the prior month, according to a Bloomberg survey of analysts before today’s Commerce Department report. Data from ADP Employer Services may show companies added 100,000 workers this month, down from 114,000 in July. The private release comes two days before the Labor Department’s monthly jobs report, which is forecast to show payrolls climbed by 70,000 in August after an increase of 117,000 in July.

Thirty-year notes led declines in Treasuries today, adding two basis points to 3.55 percent. European government bonds dropped, with the yield on 10-year German bunds rising three basis points to 2.18 percent and the yield on French securities advancing four basis points to 2.86 percent.

Treasury Returns

Slowing growth has boosted demand for the relative safety of government debt, even after Standard & Poor’s cut the U.S. credit rating on Aug. 5. U.S. government debt returned 3.05 percent in August, the biggest monthly gain since December 2008, based on Bank of America Merrill Lynch data. While speculation the Fed will enact more stimulus to safeguard the recovery has pushed the MSCI World Index up 6.3 percent since Aug. 22, the benchmark for global stocks is still down 6.1 percent in 2011.

The cost of insuring government debt fell to the lowest in two weeks as German Chancellor Angela Merkel’s Cabinet ratified an expansion of the European Financial Stability Facility to help tackle the euro-area debt crisis. The Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments dropped eight basis points to 291.

Swiss Franc

The Swiss franc appreciated 1.5 percent against the euro and 1.6 percent versus the dollar, snapping three days of declines. The Dollar Index was little changed.

Copper rose for a sixth day on the London Metal Exchange, gaining 0.7 percent to $9,223 a metric ton. Gold declined 0.4 percent to $1,827.73 an ounce, paring the biggest monthly advance since November 2009. Oil in New York lost 0.9 percent to $88.09 a barrel, bringing this month’s drop to 8 percent, the biggest decline since May.

The MSCI Emerging Markets Index rose 1.1 percent, trimming its slide this month to 10 percent, its worst performance since October 2008. South Korea’s Kospi Index advanced 2 percent and Taiwan’s Taiex index gained 1.2 percent. The Micex Index jumped 0.8 percent in Moscow, trimming its monthly loss to 9.9 percent, the biggest drop since June 2009.