By Justin Carrigan Feb. 2 (Bloomberg) -- The Australian dollar dropped after the central bank unexpectedly left interest rates unchanged. European stocks and U.S. futures rose, while German bunds led government bonds lower. Australia’s currency weakened against all 16 of its most- traded peers tracked by Bloomberg as of 10:10 a.m. in London. Europe’s Dow Jones Stoxx 600 Index advanced 0.5 percent. Futures on the Standard & Poor’s 500 Index climbed 0.3 percent. The Reserve Bank of Australia left its key rate at 3.75 percent, defying the forecasts of all 20 analysts in a Bloomberg survey and signaling policy makers want to gauge the strength of the recovery before raising borrowing costs again. Economists anticipate that the European Central Bank and the Bank of England will keep borrowing costs unchanged when they meet later this week. “The fact that the Bank of Australia kept rates on hold against all expectations should be seen as a reality check that central banks are not in to strangle economies even if they are pushing banks to lend,” Simon Quijano-Evans, a strategist at Credit Agricole Cheuvreux in Vienna, wrote in a research note. The Aussie dropped 1.3 percent versus the U.S. dollar and the yen. The dollar was little changed near a seven-month high against the euro. Stimulus Withdrawal Central banks around the world are weighing how soon to withdraw economic-stimulus measures and raise interest rates from record lows. The Bank of England will decide Feb. 4 whether to increase a 200 billion-pound ($319 billion) program of asset purchases designed to revive the economy. The MSCI World Index of 23 developed nations’ stocks added 0.5 percent. The MSCI Asia Pacific Index gained the most in two weeks after U.S. manufacturing expanded more than estimated. Canon Inc., a camera maker that gets about 28 percent of revenue from the Americas, climbed 2.7 percent in Tokyo. Toyota Motor Corp. gained 4.5 percent after the automaker said it will resume some production operations that were halted after recalling 2.3 million cars to fix faulty accelerator pedals. European oil and gas shares fell after BP Plc plunged 4.2 percent. The region’s biggest oil company reported fourth- quarter earnings that missed analysts’ estimates and predicted the recovery from last year’s recession will be “slow and gradual.” Declines were limited as Rio Tinto led a rally in basic resources shares, climbing 2.3 percent. The world’s third- biggest mining company was raised to “buy” from “hold” at Citigroup Inc., which cited upgrades to iron-ore prices. Home Sales U.S. stock-index futures gained 0.2 percent, after the S&P 500 yesterday posted its biggest jump in a month. The number of contracts to buy previously owned U.S. homes was probably little changed in December after a record plunge a month earlier, indicating a renewed tax credit will take time to revive sales, economists said before a report due at 10 a.m. in Washington. A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009 with a 76 percent increase in profits. Almost 80 percent of the results released since Jan. 11 topped the average forecasts of Wall Street estimates, data compiled by Bloomberg show. United Parcel Service Inc. and Dow Chemical Co. are among companies reporting earnings today. Paul Volcker, head of the U.S. Economic Recovery Advisory Board, is likely to repeat his call to prohibit commercial banks from owning hedge funds and limit their ability to trade for their own accounts when he testifies to the Senate Banking Committee. Romanian Rates The MSCI Emerging-Markets Index climbed 0.3 percent as Russia’s Micex Index gained 1 percent and Abu Dhabi’s ADX Index advanced 0.8 percent. Taiwan’s Taiex Index dropped 1.3 percent, leading Asian gauges lower. Romania’s BET index rose 0.4 percent as economists predict the central bank will lower its interest rate by half a percentage point tomorrow. Russia is likely to cut its rate by 1 percentage point in “coming months,” Barclays Capital said in a report today. Government bonds fell, with the yield on the U.S. 10-year Treasury rising 2 basis points to 3.67 percent. The yield on the German bund increased 3 basis points to 3.31 percent. Copper for delivery in three months fell 0.1 percent to $6,783.75 a metric ton on the London Metal Exchange. Gold for immediate delivery retreated 0.1 percent to $1,104.80 an ounce. Crude oil added 0.5 percent to $74.76 a barrel in New York. To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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