Optimism buoys metals and stocks
Central bankers boost confidence in global recovery
August 25, 2009
By Stuart Wallace
Industrial metals advanced and stocks rose around the world for a fifth day yesterday as leaders of the biggest central banks buttressed confidence in the global economic recovery.
Copper rose for a third day and lead reached its highest price since last September. The MSCI world index of 23 developed nations added 0.6 percent at 10.10am in London for its longest streak in almost a month. Futures on the Standard & Poor's (S&P) 500 index advanced 0.3 percent. The yen declined against all 16 of the most-traded currencies.
Federal Reserve chairman Ben Bernanke and European Central Bank president Jean-Claude Trichet, speaking at the annual central bankers' symposium in Wyoming, said the world economy was pulling out of recession.
The US Commerce Department tomorrow might report that purchases of new US houses rose 1.6 percent in July to 390 000, the highest level since last November, a Bloomberg survey of economists showed.
"Recent data justify relief, not euphoria," Marco Annunziata, the chief economist at UniCredit Group in London, wrote in a research note. "Policy makers will maintain a supportive fiscal and monetary stance - exit strategies are definitely not around the corner - while trying to set market expectations on an even keel."
European industrial orders increased more than economists forecast in June, another indication that the worst recession in six decades is easing. Orders rose 3.1 percent from May, the biggest gain in 19 months, the EU's statistics office in Luxembourg said.
Copper for delivery in three months rose 1.8 percent to $6 380 (R49 600) a ton on the London Metal Exchange and has more than doubled this year. Lead added 6.3 percent to $1 908 a ton, after earlier reaching an 11-month high of $1 999.50. Aluminium, nickel and zinc also gained.
US crude for October delivery rose 0.4 percent to $74.15 a barrel in early trade on the New York Mercantile Exchange, a fifth consecutive gain.
Raw material companies led the advance in European shares, climbing 3.3 percent as a group as the Dow Jones Stoxx 600 index added 0.9 percent. BHP Billiton, the world's largest mining company, gained 3.1 percent in London, while Rio Tinto, the third-biggest, surged 5.3 percent.
US futures indicated the S&P500 may post its fifth straight advance, which would mark the longest stretch of gains since November.
Freeport-McMoRan Copper & Gold, the world's largest publicly traded copper producer, increased 1.6 percent in German trading.
The MSCI emerging markets index of stocks in 22 developing economies added 1.6 percent to 859.24 points, heading for the highest close in almost three weeks.
The Budapest Stock Exchange index in Hungary rose 3.9 percent to the highest level since October. The country's central bank was due to cut the benchmark interest rate to a 17-month low of 8 percent yesterday, according to all 17 analysts in a Bloomberg survey, as it grapples with the worst recession in 18 years.
Estonia's benchmark OMX Tallinn index surged the most in 11 years, jumping 13 percent. Eesti Telekom, which accounts for 46 percent of the gauge's value, rose 24 percent after TeliaSonera offered to acquire the 39.88 percent of Eesti it doesn't already own.
Emerging market borrowing costs dropped to a seven-day low.
The extra yield demanded by investors before they will own the bonds of developing nations, instead of US treasuries, declined 3 basis points to 3.62 percentage points, the lowest level since August 12, according to JPMorgan Chase's EMBI+ index.
The yen fell, weakening 1.3 percent against the South Korean won and 0.9 percent compared with the Australian dollar, as demand for the safety of the Japanese currency declined in favour of higher-yielding investments.
The dollar advanced 0.3 percent versus the euro.
Trichet said that the world economy might face a "very bumpy road ahead".
The US government plans to sell $109 billion of treasuries in three days starting today, matching a record, as President Barack Obama's administration borrows record amounts of money to revive the economy.
The yield on the 10-year note was little changed at 3.56 percent. - Bloomberg
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