SF: Dollar Weakens as Emerging Stocks, Currencies, Commodities Gain
Dec. 31 (Bloomberg) -- The dollar weakened for a third day against the euro, while stocks and currencies in emerging markets climbed as confidence in the economic recovery prompted investors to seek higher returns. Copper and cotton soared.
The dollar depreciated 0.6 percent against the euro at 8:20 a.m. in New York, paring its biggest annual gain since 2005. The MSCI Emerging Markets Index rose 0.6 percent. Copper jumped 1.6 percent, bringing its gain this year to 31 percent, cotton advanced 1.7 percent and oil fell 0.6 percent. The U.K.'s FTSE 100 Index sank 1.2 percent, with most markets in western Europe closed. Standard & Poor's 500 Index futures lost 0.3 percent.
The MSCI emerging-market index is poised to complete the biggest two-year rally since 1989 after developing nations led the global economy's recovery from its first recession since World War II. Data on Jan. 3 may show U.S. manufacturing rose at the fastest pace in seven months, and German Chancellor Angela Merkel vowed to defend the euro as the "foundation" of her nation's economy amid Europe's debt crisis.
"U.S. economic data were stronger than expected but, rather than supporting the dollar, this instead boosted risk appetite in general and risk currencies in particular," Gareth Berry, a foreign-exchangae strategist at UBS AG in Singapore, wrote in a report today.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell 0.6 percent. The pound appreciated 0.7 percent against the dollar, paring an annual decline, as a Nationwide Building Society report showed an unexpected gain in U.K. house prices.
Emerging Markets
The won strengthened for the fifth straight day against the dollar, rising 0.8 percent. South Korean consumer prices gained more than forecast in December, bolstering the case for the central bank to raise interest rates.
Turkey's lira appreciated 0.5 percent against the U.S. currency, the Malaysian ringgit gained 0.7 percent and South Africa's rand advanced 0.5 percent. China's Shanghai Composite Index led gains among developing-nation equity gauges, rising 1.8 percent as Jiangxi Copper Co. and Yunnan Copper Industry Co. jumped on higher prices for the metal.
The MSCI emerging-market index extended this year's climb to 16 percent. The 21-country gauge has jumped 103 percent since the end of 2008, compared with a 39 percent increase in the MSCI World Index. Developing economies will expand 6.4 percent as a group next year, topping the 2.2 percent growth in advanced countries, according to October forecasts from the International Monetary Fund.
Copper, Cotton
Copper rose as much as 1.9 percent to a record $9,675 a metric ton on the London Metal Exchange, the third consecutive all-time high. Cotton, up for a second day at $1.4524 a pound, has led gains this year in the S&P GSCI Index of 24 commodities, rising 92 percent. Silver is the next biggest gainer, up 82 percent. China is the world's largest buyer of copper and cotton. Crude oil fell to $89.31 a barrel.
The drop in the U.K.'s FTSE 100, where trading closed at 12:30 p.m. local time, trimmed 2010's advance to 9 percent. The Stoxx Europe 600 Index slipped 0.3 percent, trimming this year's gain to 8.8 percent. The gauge has risen for seven of the past eight years. Exchanges are closed in 10 of the 18 western European markets today. Trading ended in Paris and Amsterdam at 2 p.m. local time.
The decline in U.S. futures indicated the S&P 500 may trim this year's 13 percent advance. The benchmark measure for U.S. equities is heading for its best December since 1991.
Gilts rose, sending the yield on the 10-year security down eight basis points to 3.39 percent. U.K. bonds returned 6.9 percent this year, beating a 6.3 percent increase by German debt and a 5.7 percent rise by U.S. Treasuries, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.
The yield on the 10-year Treasury slipped five basis points to 3.32 percent.
--With assistance from Claudia Carpenter, Michael Patterson, Andrew Rummer and Daniel Tilles in London. Editors: Stephen Kirkland, Paul Sillitoe
