European stocks, Greek bonds drop after S&P downgrade

Commodities rebounded from the steepest weekly slump since 2008. European stocks and Greek bonds fell, while the euro erased earlier gains after Standard & Poor’s cut its rating on the country’s debt.

The S&P GSCI Index of 24 raw materials jumped 1.6 per cent at 9:35 am in New York following last week’s 11 per cent slide. Silver futures climbed 5.5 per cent, oil rallied 2.4 per cent and wheat advanced 2.3 per cent. The Stoxx Europe 600 Index fell 0.4 per cent, and the S&P 500 Index (SPX) increased 0.1 per cent. Greece’s 10-year note yield rose 12 basis points as the country’s debt swaps signaled a 68 per cent chance of default. The euro was little changed against the dollar after gaining 0.9 per cent.

Last week’s commodities rout knocked off $99 billion of market value, driving out speculators and prompting Goldman Sachs Group Inc to predict a possible recovery. German exports surged in March to a record monthly value, the Federal Statistics Office said on Monday after data last week showed US payrolls increased by more than economists forecast. Greece’s credit rating was cut two levels to B from BB- on restructuring concerns by S&P, which said further reductions are possible.

“In the short run, economic activity remains quite positive,” Dominic Schnider, an analyst at UBS AG (UBSN), said in a Bloomberg Television interview in Singapore. “The growth outlook in the near term warrants that you hold or buy some commodities.”

OIL, SILVER, WHEAT
Crude rose to $99.54 a barrel in New York, after losing 15 per cent last week. Silver sank 27 per cent in the same period. Wheat jumped on Monday as adverse weather in North America, Europe and Asia threatened to reduce global production.

Commodity bulls say the expanding global economy, led by China, India and Brazil, is boosting demand at a time when producers from BHP Billiton Ltd, the largest mining company, to BP Plc, Europe’s second-biggest oil producer, can’t keep up.