BLBG: Dollar Falls as Manufacturing Grows; Oil, Copper, Gold Rally
By Justin Carrigan
Nov. 2 (Bloomberg) -- The dollar slid against high-yielding currencies, led by the Australian dollar, as China reported a surge in manufacturing and investors bet factory production in the U.S. accelerated. Oil, copper and gold climbed.
The so-called Aussie advanced versus 15 of the 16 most- traded currencies as of 10:12 a.m. in London, and the Swedish krona gained against all 16. Oil added 1 percent in New York while copper rose 0.7 percent in London and gold rallied 0.8 percent. Futures on the Standard & Poor’s 500 Index increased 0.7 percent, indicating the benchmark gauge for U.S. equities may rebound from its steepest weekly drop since May.
Manufacturing in China expanded at the fastest pace in 18 months, according to a purchasing managers’ index from HSBC Holdings Plc. The U.S. Institute for Supply Management’s manufacturing index probably climbed to the highest level in three years, a Bloomberg News survey showed. Australian Treasurer Wayne Swan today increased the government’s forecast for growth, fueling speculation the central bank will raise interest rates tomorrow for the second consecutive month.
“The markets have taken a step back and said: hold on, the global economy is recovering and we’re not in an environment where risk aversion is going to shoot up on a sustained basis,” said Daragh Maher, the London-based deputy head of global currency strategy at Calyon, the investment-banking arm of Credit Agricole SA.
Dollar Index Falls
The dollar fell most against the Australian currency, dropping 0.7 percent, sending the Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback versus some of the U.S.’s biggest trading partners, down 0.1 percent.
The pound fell for a second day against the dollar on speculation the Bank of England will extend its bond-buying program this week to revive Britain’s shrinking economy. Sterling also snapped a five-day gain versus the euro as Royal Bank of Scotland Group Plc said it may be forced to sell assets “not initially contemplated” to shore up its finances.
The dollar’s decline buoyed commodities, while China’s manufacturing report revived optimism that the world’s biggest consume of metals will buy more raw materials. Copper for three- month delivery on the London Metal Exchange rose $45 a metric ton to $6,525. Crude oil for December delivery added 61 cents to $77.61 a barrel on the New York Mercantile Exchange. Gold for immediate delivery climbed as much as $8.35 an ounce to $1,053.76, the highest price since Oct. 26.
Rice Rallies
Rice futures on the Chicago Board of Trade advanced for a fifth day to the highest level since Jan. 12 as India, the world’s second-largest grower, resumed imports for the first time since the 2005-06 marketing year. Rice for January delivery jumped 1.4 percent to $14.89 per 100 pounds.
The Shanghai Composite Index climbed 2.7 percent, its biggest gain in three weeks and the steepest advance today among benchmark indexes in the world’s 25 largest equity markets. SAIC Motor Corp., the country’s largest carmaker, jumped 6.3 percent after third-quarter profit rose more than ninefold.
The 22-country MSCI Emerging Markets Index lost 0.6 percent, while South Africa’s rand weakened 0.9 percent against the dollar, the steepest decline among developing-nation currencies tracked by Bloomberg.
U.S. futures advanced even after CIT Group Inc., the 101- year-old commercial lender that saw its funding dry up in the credit crunch, filed for bankruptcy yesterday. CIT’s decision to seek court protection may give bondholders new notes at 70 cents on the dollar plus common stock. Common stock owners could be mostly wiped out, and the U.S. Treasury Department said it won’t recoup much, if any, of the $2.33 billion of taxpayer money that went into CIT, the largest firm to go bankrupt after getting a federal bailout.
Stocks Fluctuate
The Dow Jones Stoxx 600 Index of European shares was little changed after the worst weekly slump since July, as RBS led banks lower.
Lloyds Banking Group Plc slipped 2.9 percent in London. The bank, which is 43 percent owned by the U.K. government, is trying to persuade bondholders to exchange their debt for riskier investments that could convert into equity, as part of its 25 billion-pound ($40.9 billion) fundraising plan, the Financial Times reported, citing people close to the matter.
The MSCI World Index of 23 developed countries rose as much as 70 percent from March 9 through Oct. 19 as economies from France and Germany to Hong Kong exited recessions. The Federal Reserve spent, lent or guaranteed $11.6 trillion to revive growth and held interest rates near zero to unlock credit markets.
Rate Speculation
The global gauge has since retreated 5.8 percent as speculation increased that central banks will need to raise interest rates, while reports last week showed that U.S. consumer confidence, personal spending and new homes sales dropped.
Treasuries led declines in government bonds, with the yield on the 10-year note rising 3 basis points to 3.41 percent.
Pending U.S. home sales, due from the National Association of Realtors at 10 a.m. in Washington, jumped 6.4 percent in August, according to the median estimate in a Bloomberg survey of economists.
To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net
