Bloomberg News

Stocks, Commodities Rally on Fed Bond-Buying Plan

September 14, 2012

Asian Stocks Rise on Fed Stimulus Plan; Copper Gains With Won

MSCI’s Asian gauge rallied 4.5 percent in the previous six days as European policy makers announced a bond-purchase program and China’s top planning agency approved proposals to build rail, roads and urban infrastructure. Photographer: Tomohiro Ohsumi/Bloomberg

Stocks rallied around the world, commodities surged and the dollar weakened to a four-month low after the Federal Reserve said it will buy bonds until the U.S. jobs market recovers. Oil climbed to $100 a barrel for the first time since May and government bonds fell.

The MSCI All-Country World index added 1.3 percent at 12:25 p.m. in London. Futures on the Standard & Poor’s 500 Index gained 0.5 percent after the equity benchmark yesterday rallied to its highest level since 2007. The S&P GSCI gauge of 24 commodities rose for a seventh day, gaining as much as 1.7 percent to its highest in five months. Yields on Italy’s 10-year bonds fell below 5 percent for the first time since March. The Dollar Index dropped as much as 0.7 percent.

The Fed said it will expand holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month and hold the federal funds rate near zero until at least the middle of 2015. The euro area’s creditor nations will insist that Spain accepts conditions before they will grant it a possible aid program, the Dutch Finance Minister said before the start of a two-day meeting of ministers from the currency area.

“Everything is positive because now the big difference is that explicitly the Fed is targeting, basically, nominal GDP growth,” Nicola Marinelli, who oversees $160 million as a money manager at Glendevon King Asset Management in London, said in an interview on Bloomberg Television’s “On The Move” with Francine Lacqua. “For at least three, six months, I think everything will be stable and calm and positive and bullish. What can spoil the party is if inflation comes out to be worse than expected.”

Stocks Surge

The Stoxx Europe 600 Index jumped 1.4 percent to its highest level in 14 months. A gauge of mining companies posted the biggest advance of 19 industry groups. Rio Tinto Group, the world’s third-largest commodity producer, surged 6.4 percent, while BHP Billiton Ltd. (BHP), the biggest, added 5.2 percent. Antofagasta Plc (ANTO), the copper company controlled by Chile’s Luksic family, soared 8.3 percent and Anglo American Plc advanced 7.6 percent.

Chemring Group Plc (CHG) rallied 7.5 percent as the U.K.’s Takeover Panel granted Carlyle Group LP (CG:US) an extra month to consider making a bid for the maker of munitions. In a statement today, Chemring said that the panel has a new “put up or shut up” deadline of Oct. 12. Lonmin Plc jumped 6.8 percent as the platinum producer resumed talks with workers in an attempt to end a five-week strike at its Marikana mine in South Africa.

Consumer Confidence

S&P 500 futures advanced, indicating that the equity benchmark will extend gains after rising to its highest level since 2007. The Thomson Reuters/University of Michigan gauge of consumer confidence slipped to 74 in September from 74.3 in August, according to economists surveyed before a report at 9:55 a.m. New York time.

Fed Chairman Ben S. Bernanke is enlarging his supply of unconventional tools to attack U.S. unemployment stuck above 8 percent since February 2009, a situation he called a “grave concern.” Unlike two previous rounds of quantitative easing, yesterday’s program has no end date.

The difference between yields on U.S. government 10-year notes and same-maturity Treasury Inflation Protected Securities, an indicator of trader expectations for consumer prices over the life of the debt, widened to as much as 2.54 percentage points, the most since May 5, 2011.

The 10-year Treasury note yield climbed 10 basis points to 1.82 percent, the rate on similar-maturity German bunds increased 13 basis points to 1.69 percent and 10-year U.K. gilt yields reached 1.92 percent.

Italian Bonds

The yield on 10-year Italian bonds fell as much as six basis points to 4.95 percent. It’s the first time the rate has dropped below 5 percent since March 26.

The dollar depreciated as much as 1 percent to $1.3121 per euro, the weakest level since May 4. The South Korean won appreciated 1 percent to 1,117.30 per dollar, the biggest jump since May 28, after S&P upgraded the nation’s debt. Singapore’s dollar reached S$1.2178 against its U.S. equivalent today, the strongest level since Sept. 9, 2011. The pound climbed to $1.6247, the highest since April 30.

The yen retreated from a seven-month high against the dollar after Finance Minister Jun Azumi signaled he’s ready to intervene to weaken the currency.

Oil rose above $100 for the first time since May 4 amid concern that unrest in the Middle East and North Africa will disrupt supplies.

West Texas Intermediate crude for October delivery climbed as much as 2.2 percent to $100.42 a barrel in electronic trading on the New York Mercantile Exchange.

Gold Climbs

Spot gold rose 0.4 percent to $1,774.72 an ounce in London trading, and earlier today touched $1,778, the highest price since Feb. 29. Copper climbed to $8,381 a metric ton on the London Metal Exchange, and rose as much as 4.1 percent to $8,408, its highest price since May 2. Zinc, lead, nickel and tin jumped more than 3 percent.

Platinum rose for an 11th day for its longest streak of gains in more than a quarter of a century. Workers protested about their pay at mines owned by the three companies that account for more than half of global output of the metal.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell for a fourth day, declining 7 basis points to 175, the lowest since the current series of the gauge started trading in March. The index has retreated for 10 straight weeks, its longest-ever rally.

The cost of insuring against a Spanish default declined for a third day, dropping 16 basis points to an 11-month low of 335, while contracts on France dropped 10 basis points to 101, the lowest since July 2011.

The MSCI Emerging Markets Index increased 3 percent, the most in 11 weeks. The Hang Seng China Enterprises Index of mainland companies jumped 3.7 percent and India’s Sensex climbed 2.5 percent. Russia’s Micex Index (INDEXCF) rose 3.9 percent, extending its rally from this year’s low in May to more than 20 percent, the threshold for a bull market.

To contact the reporter on this story: Will Hadfield in London at whadfield@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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Companies Mentioned

  • CG
    (Carlyle Group LP/The)
    • $27.56 USD
    • -1.10
    • -3.99%
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