While you were sleeping: Shares rise ahead of Fed

Thursday 17th December 2009

Stocks advanced as investors bet the U.S. Federal Reserve would vote today to keep its key interest rate unchanged and signal that it would continue to keep rates low, moves which should bolster the emerging global economic recovery.

In early afternoon trading, the Dow Jones Industrial Average rose 0.27% to 10,480.19, the Standard & Poor’s 500 Index rose 0.58% to 1114.31 and the Nasdaq Composite Index gained 0.66% to 2215.30.

The latest report on housing starts in the U.S. - which showed building permits were at their highest level in a year - bolstered homebuilders including DR Horton and Pulte Homes.

Among other advancers were Exxon and Freeport-McMoRan after both oil and gold prices rose. Nvidia shares rose after the U.S. Federal Trade Commission sued computer chip maker Intel, alleging it used its market dominance to stifle competition.

Banking shares advanced after sources said global regulators would give banks a grace period before forcing them to implement stricter capital rules, easing concern lenders would need to issue huge amounts of shares in the near future.

The Stoxx 600 advanced 1.3% to 250.33; it’s now up 58% since March 9. The national benchmark indexes rose in 17 of 18 Western European markets. The FTSE 100 rose 0.7%, Germany’s DAX shot 1.6% higher and France’s CAC gained 1.1%.

Insurers and banks’ stocks gained the most among the 19 industry groups in the Stoxx 600. Commerzbank added 6.7% and Deutsche Bank added 5.5%.

Among other advancers in Europe were Barratt Developments, Taylor Wimpey, Vallourec and Zodiac Aerospace.

Japanese regulators have been pushing the Basel Committee to take a more flexible approach to capital standards to make it easier for Japan's biggest banks, which are seen as having some of the worst capital ratios in Asia.

The Bloomberg Professional Global Confidence Index fell to 58.9 this month from 60.3 in November. The series that began two years ago reached its highest in October with a reading of 61.7. The index exceeded 50 for a fifth month, which means there were more optimists than pessimists.

Oil and industrial metals gained on optimism the recovery will boost raw material demand. Copper for delivery in three months rose 1.3% on the London Metal Exchange. Crude for January delivery gained as much as 1.3% to US$71.59 a barrel in New York. Gold for immediate delivery rose 0.5% in London, to US$1130.60 an ounce.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 1.47%% to 278.30.
The global copper market recorded a surplus of 196,000 tons in January to October this year, the World Bureau of Metal Statistics said. That compares with a 65,000-ton surplus a year earlier, the research company said today.

Among other LME metals for three-month delivery, zinc climbed 3% to US$2405 a ton and lead rose 1.3% to US$2390.75 a ton. Zinc and lead supply outpaced demand in October as production of both metals rose from the previous month, the International Lead & Zinc Study Group said today.

In U.S. economic news, housing starts rose 8.9% to an annual rate of 574,000, the Commerce Department said today in Washington. Building permits, a sign of future construction, climbed to the highest level in a year.

Federal Reserve chairman Ben Bernanke was named Person of the Year by Time magazine on Wednesday, a highly visible show of support at a time he seeks to beat back proposals that would erode the central bank's authority and independence.

Time credited Bernanke with creative leadership that ensured 2009 would be a year of recovery, however weak, rather than a catastrophic second Great Depression.

"The recession was the story of the year. Without Ben Bernanke ... it would have been a lot worse," Time managing editor Richard Stengel said in a statement.

The U.S. Dollar Index, a gauge of the U.S. currency against six counterparts, slid 1.4% to 76.81. The dollar traded at US$1.4582 per euro in New York. The greenback was flat at 89.52 yen. The yen bought 130.55 per euro.

Fed funds futures on the Chicago Board of Trade indicated a 51% chance that the central bank will raise its target lending rate by at least a quarter-percentage point by its June meeting, compared with 36% odds a month ago.

Businesswire.co.nz

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