BLBG : Stocks, Commodities Climb as Australia Raises Interest Rates
Stocks rose around the world and commodities rallied as Australia unexpectedly increased interest rates, the first Group of 20 nation to do so since the recession began, amid evidence the recovery is gathering momentum.
The Australian dollar rallied against all 16 of the most traded currencies tracked by Bloomberg at 10:19 a.m. in London. The MSCI World Index of 23 developed countries added 0.9 percent, while futures on the Standard & Poor’s 500 Index gained 0.8 percent. Copper advanced for a second day, rebounding from five straight weekly declines.
The Reserve Bank of Australia’s decision to boost the overnight cash rate target to 3.25 percent from a 49-year low of 3 percent followed the first expansion this year in U.S. service industries. Manufacturing in emerging markets increased the most in the past three months since the second quarter of 2008, according to the HSBC Emerging Markets Index of data from purchasing managers.
“If there was a country that would be first to hike, then Australia was always a strong candidate,” wrote Jim Reid, a strategist at Deutsche Bank AG in London, in a report. “What it does remind us is how quickly things can change in both directions. The prospect of no rate changes, or no accidents, in the largest world economies over the next 12 to 18 months seems unlikely.”
Raw-material producers and banks led the second straight advance in Europe’s Dow Jones Stoxx 600 Index, which added 1.3 percent. BHP Billiton Ltd., the world’s largest mining company, rose 1.7 percent in London.
Banks Rally
Credit Agricole SA advanced 3.2 percent in Paris after BofA Merrill Lynch Global Research raised France’s third-largest bank by market value to “buy” from “neutral.” A gauge of European banks climbed 1.9 percent, the second- biggest advance among 19 groups in the Stoxx 600, after BofA Merrill raised the industry to “overweight,” saying “reasonable valuations offer the potential for re-rating.”
The rise in U.S. futures indicated the S&P 500 and the Dow Jones Industrial Average may climb for a second day. Alcoa Inc. is scheduled to report third-quarter results tomorrow, the first among Dow companies. Fairfield, Connecticut-based General Electric Co. and Intel Corp. of Santa Clara, California, are among the 45 S&P 500 companies that will release earnings in the next two weeks.
Analysts surveyed by Bloomberg estimate that operating income at S&P 500 companies dropped 23 percent in the July- September period, the ninth straight decrease.
Emerging Markets
The MSCI Emerging Markets Index rallied the most in two weeks, gaining 1.5 percent. The Philippine Stock Exchange Index jumped 2.3 percent and Russia’s Micex Index climbed 1.9 percent. OAO Lukoil, Russia’s second-largest oil producer, rose 2 percent and OAO GMK Norilsk Nickel advanced 2.7 percent. Benchmark indexes in Poland, Taiwan, Thailand and Indonesia gained more than 1 percent.
Copper for delivery in three months rose 1.9 percent to $6,030 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also advanced. Gold for immediate delivery gained 0.2 percent to $1,019.28 an ounce, within 1.3 percent of the record $1,032.70 reached in March last year.
Oil rose for a second day as the dollar’s decline bolstered the appeal of commodities as a hedge against inflation. Crude oil for November delivery rose 53 cents, or 0.8 percent, to $70.94 a barrel on the New York Mercantile Exchange.
Kuwait, Saudi Arabia
Kuwaiti Oil Minister Sheikh Ahmed Al-Abdullah Al-Sabah said today that demand for crude will improve in the U.S. and Europe next year. He also said Gulf states have no plan to move away from dollar pricing, denying a report in London’s Independent newspaper that oil producers and major consuming nations including China had discussed a shift from the dollar as the currency used to trade oil. Saudi Central Bank Governor Muhammad al-Jasser also denied the report.
The dollar pared declines after the denials. The U.S. currency had fallen as much as 0.8 percent versus the yen and 0.7 percent against the euro following the report, which cited unidentified sources. The Australian dollar rose 1.1 percent against the greenback.
U.K. two-year gilts led declines in government bonds, with the yield rising 4 basis points to 0.75 percent. British house prices increased for a third month, Halifax, a division of Lloyds Banking Group Plc, said today. A separate report from the Office for National Statistics showed manufacturing unexpectedly dropped 1.9 percent to the lowest level since 1992.
The cost of protecting European corporate bonds from default fell for a second day, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mainly high-yield companies dropping 15 basis points to 570, the lowest level in almost a week, JPMorgan Chase & Co. prices showed.
To contact the reporters on this story: Daniel Hauck in London at dhauck1@bloomberg.net.
