Stocks, Commodities Rise on Dubai, China; Dollar Weakens
Dec. 1 (Bloomberg) -- Stocks rallied from Shanghai to NewYork and the dollar slid as Dubai World said it’s in talks torestructure less than half its debt and Chinese manufacturinggrew at the fastest pace in five years. Treasury 10-year notesdropped for the first time in six days.
The Standard & Poor’s 500 Index added 1.2 percent to1,108.83 at 1:03 p.m. and Europe’s Dow Jones Stoxx 600 Indexjumped 2.7 percent, the most since July. The dollar weakenedagainst 14 of the 16 most-traded currencies, gold rose to arecord and oil climbed more than 2 percent. Aluminum, copper,lead and zinc led gains in industrial metals in London.
Dubai is in talks with its lenders to restructure $26billion of debt, easing concern that a default would add to the$1.7 trillion that financial companies around the world havewritten down because of the credit crisis. An HSBC Holdings Plcindex showed China’s manufacturing increased last month, whilethe Institute for Supply Management said U.S. manufacturingexpanded in November for a fourth consecutive month.
“The scare with Dubai World is dissipating, it’s a fadedmemory at this point,” said Scott Richter, who helps oversee$18.6 billion at Fifth Third Asset Management in Cleveland.“The fact that they’re trying to restructure the debt and thecentral banks in the region are providing liquidity implies thatit’s a more contained issue and it’s not going to blow up intoanother systemic Lehman Brothers. Or at least that’s the hope.”
Commodity Producers Rally
Producers of raw materials rallied 1.8 percent to leadgains in the S&P 500 among 10 groups. The Dow Jones IndustrialAverage increased 119.26 points, or 1.2 percent, to 10,464.1.Caterpillar Inc., the largest maker of earth-moving equipment,and Home Depot Inc., the biggest home-improvement retailer,jumped at least 2.6 percent after the number of contracts to buypreviously owned U.S. homes unexpectedly rose 3.7 percent inOctober, according to the National Association of Realtors.
Commodity producers, real-estate and media companies ledgains in Europe as all 19 industry groups in the Stoxx 600advanced at least 1.7 percent. HSBC Holdings Plc, the region’slargest bank, added 2.7 percent in London as concern eased thatlosses from a possible default by Dubai World will spread. BHPBilliton Ltd. led basic-resources companies higher, gaining 3.5percent.
The MSCI Asia Pacific Index jumped 1.5 percent. NissanMotor Co., which gets 35 percent of its revenue from NorthAmerica, added 3 percent in Tokyo as the yen slumped against thedollar. Baoshan Iron & Steel Co. surged 7.8 percent in Shanghaion speculation steel demand in China will increase.
The Shanghai Stock Exchange Composite Index added 1.3percent and extended its two-day gain to 4.5 percent, thebiggest since October.
‘Following on the Upside’
“When China is going up, the U.S., Europe and the U.K. arefollowing on the upside,” said Louis de Fels, a Paris-basedmoney manager at Raymond James Asset Management International,which oversees $29 billion. “We can see that what’s happeningin Dubai was not a huge factor for the market, because we justwent down for one day.”
Dubai’s announcement Nov. 25 that it would seek to delaydebt repayments stoked concern that a potential default wouldset back the global financial system’s recovery from therecession. It triggered the biggest stock market slump in threemonths in Asia and Europe’s worst rout since April as the debtrequest risked adding to banks’ losses.
Qatar’s benchmark equity index fell 8.3 percent on thenation’s first trading day since Dubai’s announcement, leadingdeclines across the Persian Gulf. The Dubai Financial MarketGeneral Index sank for a second day, dropping 5.6 percent to thelowest level since August.
Treasuries Drop
Treasuries declined as demand for the relative safety ofU.S. government debt decreased. The yield on the 10-yearTreasury note rose four basis points to 3.24 percent.
The extra yield investors demand to own emerging-marketdebt over U.S. treasuries fell 10 basis points to 3.19percentage points, according to JPMorgan Chase & Co.’s EMBI+Index. The MSCI Emerging Markets Index of equities climbed 2.3percent, the most since Nov. 9.
Dubai’s credit risk fell the most in nine months. The costto protect against a default by Dubai dropped 98 basis points to472, heading for the biggest one-day decline since Feb. 23,according to credit-default swap prices from CMA Datavision.
Crude oil for January delivery gained as much as $1.66, or2.2 percent, to $78.94 a barrel in New York. Natural gas fordelivery next month added 0.3 percent.
Copper advanced 1.3 percent to $3.2195 a pound in New York,while lead, zinc and aluminum also rallied. Gold rose for the11th time in 12 session, jumping to a record above $1,200 anounce as declines in the dollar spurred investor demand for aninflation hedge.
Australia’s dollar rose, strengthening 1 percent versus theyen and 0.9 percent against the U.S. currency, as the nation’scentral bank increased interest rates for an unprecedented thirdconsecutive month, citing the pace of Asia’s economic recovery.
To contact the reporters on this story:Mary Childs in New York at mchilds4@bloomberg.net;Michael Patterson in London at mpatterson10@bloomberg.net.
Last Updated: December 1, 2009 13:05 ESTSource: Bloomberg
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