By Adam Haigh
March 24 (Bloomberg) -- U.S. stock-index futures fell and European shares fluctuated as banks and raw-material producers retreated after the biggest rally in the Standard & Poor’s 500 Index in five months. Asian shares advanced.
Bank of America Corp. slid 3.8 percent after surging 26 percent yesterday. Rio Tinto Group and BHP Billiton Ltd. dropped for the first time in four days as copper snapped its longest streak of gains since 2007. Hyundai Engineering & Construction Co. jumped 7.1 percent as South Korea announced a record stimulus package.
Futures on the S&P 500 slipped 0.8 percent at 11:29 a.m. in London. The gauge rallied 22 percent since March 9 as Citigroup Inc., Bank of America and JPMorgan Chase & Co. said they made money in the first two months of 2009 and Treasury Secretary Timothy Geithner unveiled plans by the U.S. yesterday to finance as much as $1 trillion in purchases of distressed assets.
“Questions remain,” said Bill Dinning, Edinburgh-based head of investment strategy at Aegon Asset Management, which oversees $61.6 billion. “I’m not convinced the plan is the complete end game for what ails us in the financial sector,” he said in a Bloomberg Radio interview.
The U.S. plan to help banks dispose of toxic assets spurred investor appetite for higher-yielding currencies, sending the yen to a five-month low against the euro. Treasuries fell for a fourth day as the easing risk of corporate defaults cut demand for government debt.
The S&P 500 soared 7.1 percent yesterday as the Treasury said the U.S. Public-Private Investment Program will use $75 billion to $100 billion from the $700 billion Troubled Asset Relief Program enacted last year, giving the government “purchasing power” of $500 billion.
BlackRock Inc.’s global macro fund, the world’s second-best performer over two years among hedge funds that invest based on economic trends, is betting against the rally in equities.
“The risk is that the economic recovery disappoints in the second half and that equity markets need to revisit their lows in the next few months and maybe go through them,” David Hudson, BlackRock’s Sydney-based manager of the Asset Allocation Alpha Fund, said in an interview March 20.
Europe’s Dow Jones Stoxx 600 Index added 0.5 percent after earlier declining 0.2 percent. The gauge pared an earlier advance of as much as 1.7 percent as Rio Tinto and BHP Billiton retreated. The MSCI Asia Pacific Index increased 1.9 percent.
“Geithner is all about fixing the banks and that is an essential first step in fixing the economy,” said Richard Lacaille, chief investment officer at State Street Global Advisers, which has about $1.7 trillion under management. Still, “this is a bear-market rally. Describing it as a beginning of a bull run is extremely premature,” he said in a Bloomberg Television interview in London.
Bank of America slipped 3.8 percent to $7.50. Citigroup, which rallied 19 percent yesterday, lost 4.8 percent to $2.98.
Investors should sell bank stocks because the Treasury Department’s plan won’t stop profits from dropping, Bank of America’s Richard Bernstein said. Analysts project profit at financial companies in the S&P 500 will decline 33 percent this quarter and 34 percent in the next, according to estimates compiled by Bloomberg.
A gauge of European raw-material producers slid 3.5 percent for the biggest retreat among 19 industry groups in the Stoxx 600. Copper futures in Shanghai climbed 17 percent in seven days on speculation demand from the world’s largest consumer of the metal may be rising as imports doubled amid falling inventories.
Rio Tinto, BHP
Rio Tinto, the world’s third-biggest mining company, fell 6.7 percent to 2,139 pence. BHP Billiton, the largest, declined 5.2 percent to 1,429 pence.
Hyundai Engineering jumped 7.1 percent to 59,200 won. GS Engineering & Construction Corp., South Korea’s third-biggest builder by market value, climbed 5.3 percent to 61,600 won.
The country’s government plans to spend a record 17.7 trillion won ($13 billion) on cash handouts, cheap loans, infrastructure and job training.
Swiss Life Holding AG added 1.7 percent to 73.35 francs. Germany’s Talanx AG agreed to buy as much as 9.9 percent of Switzerland’s biggest life insurer. Talanx will also buy 8.4 percent of MLP AG from Swiss Life.
The S&P 500’s gain yesterday pushed the index’s increase since sinking to a 12-year low on March 9 to 22 percent, the steepest two-week advance since 1938.
The S&P 500 needed only 10 days to enter a bull market after taking seven weeks to fall 20 percent and give President Barack Obama a bear market.