BLBG: Copper, Pound Rise; European Stocks, U.S. Index Futures Gain
Commodities rose as Chinese investment in factories and copper imports surged, while the pound strengthened after manufacturing, housing and retail sales data signaled the worst of the U.K. recession may be ending. European stocks and U.S. index futures advanced.
Copper and aluminum increased for the first time in four days. The pound rallied as a report showed the smallest decline in U.K. manufacturing in more than a year. The Dow Jones Stoxx 600 Index of European stocks added 0.4 percent at 12:58 p.m. in London, paring a gain of as much as 0.9 percent as banks fell. Standard & Poor’s 500 Index futures rose 0.4 percent.
China’s investment in factories and property climbed 30.5 percent in the four months through April, more than economists forecast. Copper imports jumped to a record last month. Gains in stocks were limited after a two-month, 37 percent surge valued the MSCI World Index at the most relative to earnings since July 2007. The Chinese government is spending 4 trillion yuan ($586 billion) to stimulate growth.
“Continued evidence of global economic recovery is important for confidence,” Derek Halpenny, the London-based head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., wrote in a note today. “China is expected to play an important role in bringing about some of that recovery and the data from China today signaled some more positive developments.”
Copper, Aluminum
Copper for delivery in three months gained 2.4 percent to $4,675 a metric ton on the LME and aluminum added 0.7 percent to $1,550 a ton. Crude oil increased 2.1 percent to $59.71 a barrel in New York.
Imports of copper in China rose 7 percent to a record in April as buyers replenished stockpiles. Aluminum shipments almost tripled, the Beijing-based customs office said today. The nation accounts for 33 percent of global aluminum consumption and 26 percent of copper demand, according to Edinburgh-based Royal Bank of Scotland Group Plc.
China’s economy will expand 7.8 percent this year, compared with a 2.5 percent contraction in the U.S., according to economists surveyed by Bloomberg.
Russia led a rally in east European stocks on an improved outlook for the region’s commodity producers. The Micex index added 2.5 percent.
Pound, Dollar
The pound rose to its highest level in four months against the dollar after reports showed manufacturing fell in March by less than economists forecast, house-price declines slowed in April and retail sales rose, adding to evidence the worst of the economic slump is over. The U.K. currency gained as much as 1.2 percent to $1.5301, its strongest level since Jan. 9, and was recently at $1.5293.
The dollar weakened for the fourth time in five days against the euro. Treasuries fell, driving the yield on the benchmark 10-year note one basis point higher to 3.19 percent.
A gauge of retailers posted the biggest advance among 19 groups in the Stoxx 600, climbing 2.1 percent.
Cheshunt, England-based Tesco Plc, Britain’s biggest retailer, rose 3.5 percent to 351.9 pence. Leicester, England- based Next Plc, the U.K.’s second-largest clothing retailer, added 2.9 percent to 1,550 pence. ICAP Plc initiated coverage on the two companies’ shares with “buy” recommendations.
Companies in the Stoxx 600 were valued at 21.4 times earnings on May 8, the highest since April 2004, while the S&P 500 traded at a ratio of 15.1, the most since October, weekly data compiled by Bloomberg show.
‘Rapid Recovery’
“It looks to me now as if the markets are now pricing in a rapid recovery, that they’re pricing in a V-shaped recession, which I consider extremely unlikely,” Paul Krugman, Princeton University’s Nobel Prize-winning economist, said at a forum in Shanghai today. “The market seems to be looking as if this is going to be an average recession, but it’s not.”
Royal Bank of Scotland Group Plc, the biggest bank owned by the British government, fell 4.3 percent to 44.1 pence after Zurich-based Credit Suisse Group AG cut its recommendation on the shares to “underperform.”
Profits at U.S. banks will trail consensus estimates in 2010 and 2011 and shares of lenders are “grossly overvalued” after government stress tests overestimated future earnings, former Oppenheimer & Co. analyst Meredith Whitney said in an interview with CNBC yesterday.
“The debate in markets will be shifting from whether we are having a recovery towards what type of recovery, and how sustainable and strong it will be,” Greg Gibbs, a currency strategist at Royal Bank of Scotland in Sydney, wrote in a note today. “Uncertainty on this front will restrain markets.”
