Monday, March 29, 2010

Stocks, Commodities Gain

Stocks, Commodities Gain as Yen, Dollar Weaken on Economy

By Rita Nazareth and Stuart Wallace

March 29 (Bloomberg) -- Stocks and commodities gained as the dollar and the yen fell against the euro as signs of economic recovery sparked demand for higher-yielding assets. Oil rose the most in more than five weeks.

The Standard & Poor’s 500 Index rose 0.5 percent to 1,172.31 at 1:35 p.m. to extend its gain since Dec. 31 to 5.1 percent, poised for its best first quarter since 1998. The MSCI World Index of 23 developed nations’ stocks climbed for a third day, advancing 0.5 percent, and the MSCI Emerging Markets Index increased 1.1 percent. The S&P/GSCI Index of commodities rose 2.5 percent, the most since Feb. 16. Crude rallied 3.2 percent.

Government data showed consumer spending in the U.S. rose in February for a fifth straight month and a jobs report on April 2 may show the largest increase in employment in three years. The European Union reported an improvement in business and consumer confidence. Greece plans to sell 5 billion euros of seven-year bonds, its first offering since European Union leaders and the International Monetary Fund pledged to help the nation finance its budget deficit.

“The picture is very encouraging,” said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees more than $220 billion. “There’s some hopefulness regarding a solution to the Greek crisis. Economic numbers have been fairly positive. That’s keeping the market gains going.”

Energy and raw-materials producers led gains in the U.S., with Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. rising 1.3 percent and 4.2 percent respectively. Citigroup Inc. slipped 3 percent after the U.S. Treasury Department said it plans to sell the government’s 27 percent stake in the company this year in what could become the biggest profit for the bank bailout program.

Stock Market ‘Acts Well’

Birinyi Associates Inc., the research and money-management firm founded by Laszlo Birinyi, raised its year-end forecast for the S&P 500 to 1,325. That level would mark a 14 percent rally from last week’s close.

“Given our trading background and approaches, we are impressed with the resilience of the market which, in effect, is what trading desks mean when they say the market ‘acts well,’” according to the report Birinyi sent to clients today. “Large stocks are now likely to be contributors rather than detractors.”

The S&P 500 is trading at the lowest valuation compared with junk bonds in two years, a sign the stock-market rally will continue, if two decades of history are any guide.

Junk Bonds, Stocks

The lowest-rated debt pays 3.22 percentage points more than the earnings yield on the S&P 500, the smallest gap since 2007 and a discount to the average 5.93 points of the past 22 years, data compiled by Bloomberg show. The measure of profits compared with share prices shows stocks may be undervalued next to the fixed-income investments most closely correlated with equities.

The Stoxx Europe 600 Index climbed 0.1 percent. BHP Billiton Ltd., the world’s largest mining company, surged as much as 2 percent. Bank of Ireland Plc and Allied Irish Banks Plc dropped more than 9 percent on concern the government will have to increase its stakes in the lenders as a so-called bad bank begins taking over toxic loans.

The MSCI Asia Pacific Index rose 0.5 percent.

The Shanghai Composite Index jumped 2.1 percent, the most in more than seven weeks, while Taiwan’s Taiex index climbed 0.9 percent. China Resources Land Ltd. and China Construction Bank Corp. advanced after reporting higher profits. Stocks rose even after Stern Hu, the Australian executive who headed Rio Tinto’s iron ore business in China, was sentenced to 10 years in jail by a court in Shanghai after being found guilty of taking bribes and infringing commercial secrets.

Micex Rallies

The Micex index climbed 1.7 percent for the biggest gain since March 5 even after suicide bombers killed at least 38 people in the deadliest terrorist attacks in Moscow since 2004.

Dubai shares fell the most in six weeks, with the DFM General Index sliding 2.5 percent, on concern more of the emirate’s companies will seek to delay debt payments after Dubai World’s restructuring. Contracts to protect against a default by Dubai rose 22 basis points to 426, according to credit-default swap prices from CMA DataVision.

Crude oil for May delivery rallied 3.2 percent to $82.53 a barrel in New York trading. Copper gained 3.7 percent $7,793 a metric ton and nickel increased 1.6 percent to $23,975 a ton in London, both advancing for a third day. Gold for immediate delivery rose 0.2 percent to $1,109.80 an ounce as investors bought the metal as a hedge against the weaker dollar. Silver and platinum also gained.

Yen, Dollar, Treasuries

The yen weakened 0.4 percent to 124.52 against the euro, with the dollar also depreciating 0.3 percent to $1.3452 per euro. The Dollar Index slid 0.4 percent to 81.393.

Treasuries fell, with the yield on the 10-year note up 3 basis points to 3.88 percent, near the highest level since June. The 10-year German bund yield was at 3.13 percent, while the yield on the Greek 10-year bond rose 8 basis points to 6.28 percent.

The extra yield investors demand to hold the Greek securities instead of bunds widened 11 basis points to 316 basis points.

Greece is offering more than five times the yield premium of comparable Spanish debt as the European Union’s most indebted member seeks to lure investors to its first bond sale since a bailout was agreed for the nation. Greece will price the 5 billion euros ($6.7 billion) of seven-year bonds to yield 310 basis points more than the benchmark mid-swap rate, according to a banker involved in the transaction, who declined to be identified before the sale is completed.

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