BLBG: Commodities Gain as Dollar Slumps on Economic Optimism
By Michael P. Regan and Mark Gilbert
Nov. 25 (Bloomberg) -- Stocks and commodities advanced, while the dollar approached a 14-year low against the yen, as reports on home sales, jobless claims and consumer confidence spurred optimism that the economic recovery is strengthening.
The Standard & Poor’s 500 Index added 0.2 percent to 1,107.79 at 10:31 a.m. in New York. Gold climbed to a record on demand for a store of value as the dollar weakened against 15 of 16 major currencies and broke 88 versus the yen for the first time since January, when it slid to the weakest since 1995.
U.S. reports today showed weekly jobless claims slid to the lowest level since September 2008, while home sales, consumer confidence and personal spending topped estimates. The Federal Reserve yesterday raised its forecast for 2010 U.S. growth to a range of 2.5 percent to 3.5 percent, from 2.1 percent to 3.3 percent, and signaled it will tolerate a weaker U.S. dollar.
“The U.S. is our planet’s greatest consuming nation, so a healthy U.S. economy, a healthy U.S. consumer is a strong symptom of improving global demand,” said Lawrence Creatura, a Rochester, New York-based money manager at Federated Investors Inc., which oversees $390 billion. “You’re seeing equity markets respond to that globally, as well as commodity markets.”
Europe Gains
The Dow Jones Stoxx 600 Index of European shares added 0.1 percent as raw-material producers climbed with metals. BHP Billiton Ltd., the world’s largest mining company, advanced 2.3 percent in London.
France Telecom SA gained 1.7 percent in Paris. Europe’s third-biggest phone company will merge its Orange Switzerland unit with TDC A/S’s Sunrise Communications SA division to expand in Switzerland and pay 1.5 billion euros ($2.25 billion) for a majority stake.
Equities pared gains after Dubai World, the government- owned holding company struggling with $59 billion of liabilities, said it is seeking to delay repayment on all of its debt, even after Abu Dhabi banks provided $5 billion for Dubai’s support fund.
The MSCI Asia Pacific Index added 1.3 percent. Fuji Heavy Industries Ltd., the maker of Subaru cars, rose 5.3 percent in Tokyo after the exports data.
Commerce Department reports showed consumer spending increased 0.7 percent last month, beating the median estimate of 0.5 percent from economists surveyed by Bloomberg News, and new home sales increased 6.2 percent. Separate data from the Labor Department indicted that the number of Americans filing claims for unemployment benefits fell to 466,000 last week. The Reuters/University of Michigan final index of consumer sentiment was 67.4, higher than the 67 forecast by economists.
Treasuries were little changed before the government’s $32 billion Auction of seven-year notes.
‘Excessive Speculation’
Fed officials are concerned that record-low interest rates might fuel “excessive” speculation in financial markets and possibly dislodge expectations for low inflation, according to minutes of their Nov. 3-4 meeting published yesterday. The European Central Bank is debating whether to modify the loans it makes available as it starts to scale back support for the region’s banks.
Australian central bank Deputy Governor Ric Battellino said the economy has entered a “new upswing,” while the U.K. reported that gross domestic product shrank less than forecast.
Vietnam’s central bank devalued its currency and raised interest rates to rein in inflation and a widening trade deficit that’s eroding confidence in the dong.
Vietnam Devalues
The State Bank of Vietnam lowered the reference rate 5.2 percent to 17,961 against the dollar, after the gap between spot and black-market rates widened to the most in a decade. Policy makers narrowed the dong’s daily trading band to 3 percent, from 5 percent, effective tomorrow.
Emerging-market bond yields fell 4 basis points relative to U.S. Treasury notes, pushing JPMorgan Chase & Co.’s benchmark Emerging Markets Bond EMBI+ Index of total returns to a record high of 496. The index measures the average return on emerging- market international bonds since December 1993.
The MSCI Emerging-Markets Index of equities gained 0.4 percent. South Africa’s rand climbed 1.4 percent against the dollar, leading gains in developing-nation currencies. The Australian dollar climbed 0.7 percent against the U.S. currency.
The falling dollar sent gold to record highs in New York, London and Shanghai, helped by a report in the Financial Chronicle newspaper that India may purchase more bullion for its central bank reserves. Three-month lead gained 1.6 percent to $2,370 a metric ton on the London Metal Exchange, and copper advanced 0.5 percent.
Soybeans for January delivery climbed for a second day in Chicago, rising 0.8 percent to $10.54 a bushel, on speculation demand will increase in China, the world’s biggest oilseed importer. Wheat for March delivery climbed 11.75 cents, or 2.1 percent, to $5.65 a bushel, rebounding from a five-day, 7.2 percent retreat.
To contact the reporter on this story: Michael Regan in New York at Mregan12@bloomberg.net.
