BLBG:Stocks Advance as Commodities Rebound on U.S. Budget Optimism
Stocks advanced for a second day and commodities snapped a three-day drop on optimism U.S. lawmakers can reach an agreement on budget talks. The yield on Japan’s 10- year government bonds slumped to a nine-year low as the main opposition leader called for unlimited monetary easing.
The MSCI All-Country World Index gained 0.4 percent at 8:04 a.m. in London and futures on the Standard & Poor’s 500 Index increased 0.3 percent. The Stoxx Europe 600 Index (SXXP) climbed 0.4 percent and the Nikkei 225 Stock Average advanced 1 percent. Commodities as measured by the S&P GSCI Index rebounded from a three-day decline as oil rose 0.3 percent. South Korea’s won and Taiwan’s dollar added the most in a week. Japan’s 10-year bond yield slipped to 0.71 percent, the lowest level since June 2003.
The world economy is in its best shape in 18 months as the U.S. looks likely to avoid the tax increases and spending cuts known as the fiscal cliff, according to the latest Bloomberg Global Poll of investors. Treasury Secretary Timothy F. Geithner meets congressional leaders today after Republican House Speaker John Boehner said he is optimistic officials can “avert this crisis sooner rather than later.” Japan’s Liberal Democratic Party leader, Shinzo Abe, called for unlimited monetary policy easing by the central bank until inflation reaches 2 percent.
“Market expectations are that the U.S. cutbacks will be watered down and spread over several years,” said Matthew Sherwood, Perpetual Investment’s head of markets research in Sydney. Perpetual manages about $25 billion. “If the cliff is successfully flattened out over several years, the U.S. recession feared by markets is unlikely to occur.”
Volkswagen, Honda
Almost four stocks rose for every one that fell on the MSCI Asia Pacific Index. Japan’s broader Topix (TPX) Index climbed 1 percent. Abe’s party leads the ruling Democratic Party of Japan in polls ahead of next month’s parliamentary election, the Nikkei newspaper reported today. Goldman Sachs Group Inc. said shares will benefit from policy changes if the opposition wins.
Volkswagen AG (VOW), Europe’s largest carmaker, advanced 0.7 percent after it agreed to extend a joint venture with China’s FAW Group. Rio Tinto Group (RIO) jumped 2.5 percent in London after the world’s second-largest mining company said it’s planning savings of $5 billion by the end of 2014. Honda Motor Co., which gets 44 percent of its revenue in North America, rose 2 percent in Tokyo.
Two-thirds of the 862 respondents surveyed by Bloomberg described the global economy as either stable or improving. That’s up from just over half who said that in September and is the most since May 2011. The U.S. came out on top for the eighth straight quarter when investors were asked which markets will offer the best opportunities over the next year.
Dollar, Won
Data today is forecast to show that gross domestic product in the world’s largest economy expanded faster than previously estimated while consumer costs are holding in check. Separate figures will show initial claims for jobless insurance declined and pending home sales increased, based on Bloomberg surveys.
The dollar was near the lowest this month against the euro before Geithner meets separately with each of the four top leaders in Congress today, accompanied by Rob Nabors, the administration’s director of legislative affairs.
South Korea’s won climbed 0.2 percent to 1,084.13 per dollar as optimism about U.S. budget talks outweighed data showing the nation’s manufacturers are the least confident in three years. Taiwan’s dollar added 0.1 percent to NT$29.147. Malaysia’s ringgit gained 0.2 percent to 3.0472, approaching this month’s high of 3.0425.
Bond Risk
“Sentiment toward the fiscal cliff issue is swinging between skepticism and optimism every day, and investors seem more upbeat today,” said Cho Young Bok, a Seoul-based currency dealer at Daegu Bank.
The cost of insuring corporate and sovereign bonds from non-payment in Asia fell, set for the lowest closing level in more than 16 months, according to traders of credit-default swaps and data provider CMA. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased one basis point to 112, Royal Bank of Scotland Group Plc prices show.
The S&P GSCI Index of 24 raw materials increased 0.2 percent. Oil climbed to $86.76 a barrel in New York, snapping a three-day decline, after an Energy Department report showed U.S. crude supplies slid 347,000 barrels last week. They were forecast to climb 350,000 barrels, according to a Bloomberg News survey of analysts.
Copper in London gained 0.6 percent to $7,815.50 a metric ton. Supply shortages of the metal will extend into the first half of next year as China’s economy accelerates, with 21 analysts and traders expecting copper to average $8,300 a ton in the second quarter, according to the median estimate compiled by Bloomberg.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
