Dow Tops 11,000, Treasuries Advance on Fed Bets
The Shanghai Composite Index rose 2.4 percent to 2,719.36 as of 10:32 a.m. local time, heading for the highest since May 6.Photographer: Qilai Shen/Bloomberg
Oct. 8 (Bloomberg) -- Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co., discusses quantitative easing. Gross, speaking with Tom Keene and Carol Massar on Bloomberg Radio's "Bloomberg Surveillance," sees a "long slog back to prosperity" if a second round of quantitative easing can't stimulate the U.S. economy. He also discusses bond yields and investment strategy. (Source: Bloomberg)
Oct. 8 (Bloomberg) -- Austan Goolsbee, head of the White House Council of Economic Advisers, talks about the outlook for the labor market and jobs growth strategy. U.S. employers fired 95,000 workers after a revised 57,000 decrease in August, Labor Department figures in Washington showed today. The unemployment rate held at 9.6 percent, while private payrolls that exclude government agencies climbed 64,000, less than forecast. Goolsbee speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Oct. 8 (Bloomberg) -- John Herrmann, senior fixed-income strategist at State Street Global Markets, talks about the September U.S. employment report released today and the potential impact on Federal Reserve policy. Employers cut staffing by 95,000 workers last month, more than forecast, after a revised 57,000 decrease in August, Labor Department figures showed. The unemployment rate held at 9.6 percent. Herrmann speaks with Betty Liu, Jon Erlichman and Michael McKee on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Oct. 8 (Bloomberg) -- Sebastien Galy, senior foreign exchange strategist at BNP Paribas SA, talks about global currency valuations and the likelihood of coordination between the world's major central banks on monetary policy. Galy speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Stocks rallied, sending the Dow Jones Industrial Average above 11,000 for the first time since before the May 6 crash, while Treasuries climbed and the dollar slipped as a decrease in U.S. jobs bolstered speculation the Federal Reserve will buy more debt to stimulate the economy. Corn, soybeans and wheat surged on concern over supplies.
The Standard & Poor’s 500 Index climbed 0.5 percent to 1,163.98 at 11:50 a.m. in New York and the Dow jumped to as high as 11,016.16. The dollar slid as much as 0.8 percent to 81.73 yen, a 15-year low, and the 10-year Treasury note’s yield lost 3 basis points to 2.35 percent. Corn, soybean and wheat surged by the maximum permitted on the Chicago Board of Trade after the U.S. Department of Agriculture reduced its estimates of supply.
The Labor Department report that the nation lost 95,000 jobs last month was the latest evidence that the recovery from the recession may be faltering. The data signals the Fed may buy $1.2 trillion of Treasuries as a way to inject more cash into the economy and spur growth, Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said in a radio interview on “Bloomberg Surveillance” with Tom Keene.
“The economy is still not creating jobs and the Fed is probably going to do quantitative easing,” said Barton Biggs, managing partner of New York-based hedge fund Traxis Partners LP., which oversees $1.4 billion. “It indicates that we’re still in this soft patch and in order to get out of that and minimize the risk of a double dip we need more fiscal and monetary stimulus.”
The number of jobs lost last month was 19 times the median estimate of economists in a Bloomberg survey. It was led by a decline in government payrolls that shows the damage being done by rising budget deficits.
‘Highly Disappointing
Private payrolls that exclude government agencies climbed 64,000, less than forecast, underscoring the concern expressed by some Fed policy makers that the economic recovery may require easier monetary policy. The unemployment rate held at 9.6 percent and has equaled or exceeded 9.5 percent for 14 consecutive months, the longest span of elevated joblessness since monthly records began in 1948.
“The data are highly disappointing in terms of both overall levels and the compositional dynamics of job creation,” Mohamed A. El-Erian, chief executive at PIMCO, wrote in an e- mail to Bloomberg News. “They increase the probability of the Fed implementing additional QE.”
Earnings Season
The jobs data overshadowed the unofficial start of the earnings season with Alcoa Inc.’s report after markets closed yesterday. Third-quarter earnings at S&P 500 companies are expected to have grown 23 percent from a year earlier, according to a Bloomberg survey of analysts. The survey sees a 35 percent advance in earnings this year compared with 2009.
Alcoa, the largest U.S. aluminum producer, gained 6.2 percent after reporting profit yesterday that beat analysts’ estimates and saying growth in Chinese demand will help boost global use by 13 percent this year.
The MSCI World Index of stocks in 24 developed nations was little changed. Barclays Plc lost 2 percent as Abu Dhabi’s Sheikh Mansour bin Zayed Al Nahyan hedged his entire stake in the U.K. lender, with Nomura Holdings Inc., the counterparty in the agreement, selling 649 million pounds ($1 billion) in shares of Barclays as part of the deal.
Sage Group Plc dropped 4.4 percent and Fresnillo Plc declined 3.1 percent as analysts downgraded the stocks. Actelion Ltd. rallied 11 percent after the Wall Street Journal reported Switzerland’s largest biotechnology company may sell itself. The MSCI Asia Pacific Index tumbled 0.7 percent, its first decline in six days.
China Swaps
The cost to protect against a default by China slid to a two-year low as Moody’s Investors Service said it was poised to upgrade the country’s debt. Credit-default swaps insuring China’s bonds fell 4 basis points to 55.5, the lowest level since Sept. 4, 2008, according to data provider CMA. The Shanghai Composite Index rose 3.1 percent as trading resumed after a five-day holiday.
The gains in China underscored the split in economic growth between emerging markets and developed economies as Group of Seven finance ministers met in Washington and governments from South Korea to Brazil took steps to control appreciating currencies. Emerging-market equity funds received net inflows of more than $6 billion in the week to Oct. 6, the most since late 2007, EPFR Global said in an e-mailed statement.
‘Tug of War’
“There’s a tug of war in the markets between good factors and bad factors,” said Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co., which oversees about $75 billion in Tokyo.
While shares rallied in Shanghai, declines in Jakarta and Moscow led the retreat in most developing economies. The MSCI Emerging Markets Index slid 0.3 percent after reaching a two- year high on Oct. 6.
Agricultural commodities rallied after the U.S. Department of Agriculture reduce its supply estimates. Corn futures for December delivery jumped the 30-cent limit, or 6 percent, to $5.2825 a bushel in Chicago. Soybean futures for November delivery gained the 70-cent limit, or 6.6 percent, to $11.35 a bushel on the CBOT. Wheat futures for December delivery advanced by their 60-cent limit, or 9.1 percent, to $7.1925 a bushel.
Crude oil rallied 1.6 percent to $82.95 a barrel. Gold futures rose 0.9 percent to $1,347.60 an ounce, rebounding from the biggest drop since July, as the dollar’s slump boosted the appeal of the precious metal as an alternative asset.
The Dollar Index, a gauge of the currency against six major trading partners, slipped 0.2 percent to 77.261, near its lowest level since January.
Crude oil futures climbed 62 cents to $82.29 a barrel in New York and aluminum climbed 2.9 percent in London. White, or refined, sugar jumped as much as 4.3 percent after the U.S. Department of Agriculture’s attaché in Brussels forecast a 12 percent decline in the European Union’s sugar-beet harvest.
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