BLBG:Stocks, Commodities Climb on Fed Stimulus Plan; Dollar Slides
Stocks advanced a fourth day and commodities climbed after the Federal Reserve committed to buying bonds until a recovery in the U.S. jobs market takes hold. The dollar slid to a four-month low.
The MSCI All-Country World index (MXAP) added 1.1 percent as of 8:01 in London. Futures on the Standard & Poor’s 500 Index gained 0.3 percent after the gauge closed yesterday at its highest level since 2007. Copper jumped 3.4 percent in London and oil traded in New York erased this year’s loss. Yields on Italy’s 10-year bonds fell below 5 percent for the first time since March. The Dollar Index (DXY), which tracks the greenback against major peers, dropped 0.3 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 “at least through mid-2015.” German Finance Minister Wolfgang Schaeuble discouraged Spain from seeking a full international bailout ahead of a two-day meeting of European finance chiefs starting today in Cyprus.
“The Fed’s statement made clear that this monetary easing will go on until employment growth is satisfactory,” said Akio Yoshino, chief economist in Tokyo at Amundi Japan Ltd., whose global parent has $897 billion of assets under management. “This time around we have a clear link between the economy and monetary policy, and that’s a very big thing. It should give powerful support for markets.”
Stoxx Europe
The Stoxx Europe 600 Index (SXXP) rose 1.1 percent, headed for a second weekly gain and increasing to its highest in 14 months. All 19 industry groups climbed on the gauge, led by shares of resource companies and banks.
The MSCI Asia Pacific Index advanced 2.5 percent, climbing for a seventh day, its longest winning streak since January 2011. Stocks (MXWD) rallied in the previous six days as European policy makers announced a bond-purchase program and China’s top planning agency approved plans to build rail, roads and urban infrastructure.
Hong Kong’s Hang Seng Index (HSI) and South Korea’s Kospi index climbed at least 2.8 percent today.
Woori Investment & Securities Co. surged 10 percent, leading a rally by South Korean brokerages, amid speculation the Fed plan will boost appetite for riskier assets, increasing trading volumes.
Sumitomo Metal Mining Co., Japan’s biggest gold producer, climbed 9.4 percent and Zijin Mining Group Co. (2899), China’s biggest gold miner by market value, jumped 11 percent in Hong Kong as the precious metal touched its highest level since February.
Employment Target
Spot gold rose 0.4 percent to $1,773.65 an ounce. Copper climbed to $8,346.25 a metric ton in London, poised for the highest close since May. Lead and nickel jumped more than 3 percent. Oil futures in New York gained 1.2 percent to $99.51, boosted by U.S. stimulus and concern unrest in the Middle East and North Africa will disrupt supplies.
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 MSCI All-Country World Index gained 3.7 percent in the month after the Fed announced its first asset-purchase program on Nov. 25, 2008. The gauge advanced 0.8 percent in the month after the declaration of the second plan on Nov. 3, 2010.
The won appreciated 1 percent to 1,117.30 per dollar, the strongest level since March 12. South Korea’s sovereign debt rating was raised one step to A+ by Standard & Poor’s, which cited a “less negative assessment of the geopolitical risks on the Korean peninsula.”
Shock Waves
The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, slid 0.3 percent to its lowest level since May 1. The dollar traded at $1.3039 per euro from $1.2991 yesterday and has declined 1.7 percent this week.
“Bernanke made a very strong case for engaging in quantitative easing,” said Andrew Salter, a strategist in Sydney at Australia & New Zealand Banking Group Ltd. “We’re going to see the shock waves from this policy in the U.S. dollar for a foreseeable period of time.”
The euro advanced 0.5 percent to 101.14 yen and headed for the longest stretch of weekly gains against the Japanese currency since March 2009.
Schaeuble said Spain “would be daft” to ask for a bailout on top of the 100 billion euros ($130 billion) for its banks if it didn’t need it. “I’m not in the camp that says ‘take the money,’” he said in an interview in Berlin when asked about moves to press Prime Minister Mariano Rajoy’s government to seek more aid.
To contact the reporters on this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net
To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net
