Stocks Gain on Earnings, Greece Aid; Treasuries Drop on Auction

March 25 (Bloomberg) -- Stocks rallied as France andGermany backed a Greek aid proposal and forecasts at QualcommInc. and Best Buy Co. topped estimates, while Treasuries slid ona disappointing auction of seven-year debt. The

The MSCI World Index gained 0.4 percent and the Standard &Poor’s 500 Index rose 0.7 percent at 2:18 p.m. in New York,returning to an 18-month high. Treasuries fell as a $32 billionsale of seven-year notes drew a higher-than-forecast yield andFederal Reserve Chairman Ben S. Bernanke said the U.S. economystill needs low rates. The euro erased gains and fell to analmost 11-month low versus the dollar as European Central BankPresident Jean-Claude Trichet said the region needs to takeresponsibility for its members and that possible InternationalMonetary Fund aid for Greece is “very, very bad.”

French President Nicolas Sarkozy bowed to German ChancellorAngela Merkel’s demand for an IMF role in a potential rescuepackage for Greece. ualcomm’s forecast helped send S&P 500technology shares up 1.6 percent. Financial shares rallied 2.3percent as Bernanke eased concern the U.S. central bank wouldconsider lifting rates and the Treasury was said to plan anorderly sale of its stake in Citigroup Inc.

“Bernanke is giving everybody a hall pass as he continuesto emphasize rates are going to stay low,” said MichaelMullaney, who manages $9 billion at Fiduciary Trust Co. inBoston. “With Merkel and the IMF saying they’re going to backGreece and not let them go under, that lends a feeling ofstability to the marketplace that’s been waning for the last fewweeks, with the potential for contagion being a concern.”

18-Month High

The S&P 500 climbed above its highest close since September2008 as Citigroup rose 5.3 percent. The U.S. Treasury intends tounload its 27 percent stake in the bailed-out bank using apreset trading plan that will lock the government into aschedule for selling its shares, people with direct knowledge ofthe matter said.

Best Buy Co. jumped as much as 8.8 percent after fourth-quarter profit and its full-year earnings forecast toppedanalyst estimates.

U.S. stocks also gained as initial jobless claims fell tothe lowest level in six weeks as the rebound in the economyencourages companies to make fewer cuts in payrolls. First-timejobless applications declined by 14,000 to 442,000 in the weekended March 20, lower than anticipated, Labor Department figuresshowed today.

Brazilian stocks rose after the nation’s jobless rateincreased less than projected. Vale SA gained 1.2 percent afterBaosteel Group Corp, representing Chinese steelmakers in pricetalks, said the Brazilian iron ore producer is pushing to pricethe metal on a quarterly basis in negotiations with customers.

Europe, Asian Shares

The Stoxx Europe 600 Index rose to an 18-month high,rallying 1 percent. Hochtief AG, Germany’s biggest constructioncompany, gained 4.8 percent in Frankfurt after posting earningsthat beat analysts’ estimates. Next Plc, the U.K.’s second-biggest clothing retailer, surged 5percent in London afterboosting its dividend and reporting better-than-estimatedprofit.

The contingency plan hammered out by the French presidentand German chancellor before a European Union summit today inBrussels calls for IMF funds in addition to bilateral loans toGreece. It provides a coordinating role for the EU, according totheir aides who spoke to reporters on condition of anonymitybecause the agreement has yet to be approved.

“I believe that now we are quite near,” Finnish PrimeMinister Matti Vanhanen said in a Bloomberg Television interviewtoday as the French and German leaders met. “It might be sometype of combination of bilateral arrangements and IMFparticipation.” He declined to speculate whether the EU willmake a final decision at the summit, which ends tomorrow.

Collateral Rules

European Central Bank President Jean-Claude Trichet saidthe bank will extend its emergency collateral rules beyond 2010,softening his stance as Greece struggles to cut a budget deficitthat is 12.9 percent of gross domestic product.

The dollar strengthened against 10 of 16 major counterpartsand the Dollar Index, which gauges the U.S. currency against sixmajor trading partners, increased 0.3 percent to 82.065, thehighest since May 20.

Two-year Treasury yields rose 2 basis points to 1.11percent. Ten-year yields rose 6 basis points to 3.92 percent.

The record-tying $32 billion sale of seven-year notes todayattracted a yield of 3.374 percent, compared with the averageforecast of 3.372 percent in a Bloomberg News survey of 8 of theFederal Reserve’s 18 primary dealers. The current seven-yearnote yield rose 5 basis points, or 0.05 percentage point, to3.34 percent.

Bearish on Bonds

Bill Gross, manager of the world’s biggest bond fund atPacific Investment Management Co., said the almost three-decadebond market rally may be drawing to a close.

Excess borrowing in nations including the U.S., U.K. andJapan will eventually lead to inflation as governments sellrecord amounts of debt to finance surging deficits, Gross said.Pimco, which announced in December that it would offer stockfunds for the first time, is advising that investors buy thedebt of countries such as Germany and Canada that have lowdeficits and higher-yielding corporate securities.

“Bonds have seen their best days,” Gross said in aBloomberg Radio interview today from Pimco’s headquarters inNewport Beach, California. “We are focused more in spread spacethan in yield space. Durations should be shorter than index andyou should be taking a little more risk in terms of spreads.”

Dubai

The cost to protect Dubai against a default slid as theemirate committed $9.5 billion to restructure Dubai World.Credit default swaps linked to Dubai fell 40 basis points to382.9 basis points as of 12:20 p.m. in London, according toprices provided by CMA DataVision. Abu Dhabi’s ADX General Indexgained 1.1 percent to the highest level since November.

Concern that the fallout from the global financial crisismay leave some countries unable to pay their debts was reignitedafter Dubai World said Dec. 1 it wanted to restructure $26billion of securities.

The MSCI Asia Pacific Index slipped 0.4 percent. Li & Fung,a trading company that supplies Wal-Mart Stores Inc., slumped 11percent in Hong Kong, while Unicom, China’s No. 2 mobile-phonecompany, sank 4.1 percent.

Natural gas fell below $4 per million British thermal unitsfor the first time in almost six months on a bigger-than-forecast increase in U.S. inventories.