Stocks surged, sending the MSCI World Index to a two-year high, and commodities rallied after the Federal Reserve announced plans for more bond purchases and earnings beat analyst estimates. The dollar sank and two- and five-year Treasury yields touched record lows.
The MSCI World Index gained 2.4 percent at 4 p.m. in New York. The Standard & Poor’s 500 Index climbed 1.9 percent to 1,221.05, its highest since September 2008, as banks rallied amid speculation they will be allowed to raise dividends. The Dollar Index fell 0.8 percent to an 11-month low. The S&P GSCIcommodities index added 2.3 percent as gold jumped to a record high. Irish 10-year notes slid for an eighth day, the longest drop in 23 months.
Fed Chairman Ben S. Bernanke’s $600 billion bond-buying program reinforced optimism the world economy won’t deteriorate and corporate profits will improve. The Bank of England said it kept a 200 billion-pound ($324 billion) asset-purchase plan and the European Central Bank left rates at a record low today. BNP Paribas SA, the world’s biggest bank by assets, reported a 46 percent jump in third-quarter profit, and Qualcomm Inc., the largest maker of mobile-phone chips, forecast higher earnings.
“It’s called the Bernanke put,” said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages $140 billion. “The Fed wants to put a floor under the employment market and asset prices. You’re seeing that being reflected in both stock and commodities markets. Risk assets are attractive globally.”
The Fed’s plan to inject more cash into the economy led silver to a 30-year high and emerging-market stocks to the highest level since June 2008. The U.S. currency weakened against all 16 of its major peers, losing 1.9 percent against the New Zealand dollar.
U.S. stocks extended gains as JPMorgan Chase & Co. and Bank of America Corp. surged at least 5.3 percent, sending a measure financial companies to the biggest gain among 10 groups in the S&P 500. The Fed may start allowing strong banks with good capital levels to increase dividend payments, the Wall Street Journal reported on its Web site, citing unidentified people familiar with the matter. The Fed may soon issue guidance on the standards banks must meet to boost the payments, the Journal reported.
Freeport-McMoRan Copper & Gold Inc. climbed 7 percent, reaching its highest price since July 2008 as commodity prices rallied amid the dollar’s decline. Qualcomm jumped 5.8 percent after earnings forecasts topped estimates.
General Motors Co. will reduce the U.S. government to a minority shareholder as it seeks to raise as much as $10.6 billion in an initial public offering. GM, 61 percent owned by the U.S. Treasury Department, will sell 365 million shares at $26 to $29 each, the company said yesterday in a filing with the Securities and Exchange Commission.
U.S. equity futures extended gains in pre-market trading after a measure of U.S. worker productivity rose at a 1.9 percent annual pace in the third quarter, Labor Department figures showed, surpassing the median forecast of 1 percent in a Bloomberg survey of economists. Another report showed more Americans than predicted filed applications for jobless benefits.
The Labor Department may say tomorrow that theunemployment rate was 9.6 percent in October for a third month, according to the median forecast of economists. Private payrolls, which exclude government agencies, are projected to increase by 80,000, the survey showed.
The Stoxx Europe 600 Index climbed 1.6 percent to its highest level since April 15. BNP Paribas jumped 3.7 percent in Paris and Unilever rallied 6.3 percent in London. Swiss Reinsurance Co. gained 6.4 percent in Zurich as it agreed to repay the capital injected last year by Warren Buffett. HeidelbergCement AG soared 8.9 percent as profit beat estimates.
BHP Billiton Ltd. advanced 6.6 percent to a record in London after Canada blocked its $40 billion hostile takeover for Potash Corp. of Saskatchewan Inc. Potash Corp. sank 3.5 percent in Toronto. Rolls-Royce Group Plc lost 5 percent after one of its engines exploded in mid-flight, forcing Qantas Airways Ltd. to ground its Airbus SAS A380 fleet. Airbus owner European Aeronautic Defence & Space Co. fell 4.1 percent.
The MSCI Emerging Markets Index added 1.8 percent, heading for the highest closing level since June 2008. India’s Bombay Stock Exchange Sensitive Index surged 2.1 percent to a record. Coal India Ltd. rallied 40 percent in its trading debut after selling $3.4 billion of shares in the nation’s largest initial public offering last month. The Shanghai Composite Index gained 1.9 percent, while indexes in Thailand, South Africa, Turkey and Hungary increased more than 1 percent.
The yields on the five- and two-year Treasury notes dropped to record lows of 1.0148 percent and 0.3118 percent respectively after the Fed said yesterday it will focus its asset purchases on medium-maturity debt. The German 30-year bond fell for the first time in six days, sending the yield up six basis points to 2.90 percent.
The extra yield investors demand to hold Irish 10-year bonds instead of similar-maturity benchmark German bunds widened to a record 526 basis points amid concern the nation will struggle to finance its deficit. The Portuguese-German gap increased 30 basis points to 418 basis points.
The dollar weakened 0.5 percent to $1.4205 per euro and slipped 0.5 percent to 80.66 yen. The New Zealand dollar strengthened 2.1 percent to 79.59 U.S. cents after a report showed employers added more jobs in the third quarter than economists estimated.
The pound climbed 1.3 percent to $1.6289, extending gains after the Bank of England kept its benchmark interest rate and asset-purchase target unchanged.
The S&P GSCI index of 24 commodities climbed to the highest level since October 2008. Silver futures surged 6.6 percent to $26.043 an ounce on the Comex in New York and earlier topped $26 for the first time since 1980. Gold gained the most since March 2009, rising 3.4 percent to $1,383.10. Cotton for December delivery rose 3 percent to a record in New York. Prices have more than doubled in the past 12 months, reaching the highest since the fiber began trading 140 years ago. Crude oil advanced 2.1 percent to $86.49 a barrel. Raw sugar jumped 5 percent and earlier touched 31.81 cents, the highest price since 1981.
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- Stocks, Commodities Rally on Fed Stimulus Plan; Dollar Tumbles (businessweek.com)
- Stocks, Commodities Rally on Fed Stimulus; Dollar, Bonds Drop (businessweek.com)
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