While you were sleeping: G-20 US$1.1t pledge; jobs data looms

Friday 3rd April 2009

Leaders of the Group of 20 nations pledged US$1.1 trillion to boost funding for the International Monetary Fund and free up the availability of trade credit.

At the G-20 meeting in London, leaders agreed to crack down on hedge funds and derivatives trading, tighten rules on credit rating companies and executive bonuses, and name and shame identify tax havens.

"We have reached a new consensus that we take global actions together to deal with the problems we face," said UK Prime Minister Gordon Brown, who hosted the summit.

A new global body, the Financial Stability Board, will be set up to link national regulators and provide the IMF with faster updates on threats to the financial system.

President Barack Obama said the steps taken by the G-20 are "critical to preventing us sliding into a depression."

Stocks rallied in the US and Europe, and crude oil advanced after the G-20's statement and amid signs the global economic slump may be abating. US factory orders climbed 1.8% in February after a 3.5% drop the previous month, according to the Commerce Department. UK house prices unexpectedly rose for the first time in 18 months. Manufacturing in China grew for the first time in six months in March, with the Purchasing Manager's Index rising to 52.4, seasonally adjusted, from 49 in February.

Still, the Labor Department said initial jobless claims rose by 12,000 to 669,000 last week, the highest since 1982. Investors are awaiting the release of the monthly non-farm payrolls report on Friday in the US, amid expectations the unemployment rate has climbed to a 25-year high of 8.5% last month, according to a Bloomberg survey.

The Dow Jones Industrial Average rose 2.8% to 7978.08 and the Standard & Poor's 500 Index climbed 2.9% to 834.38. The Nasdaq Composite rose 3.3% to 1602.63.

Caterpillar, which makes heavy earthmoving equipment, rose 8.8% to US$31.54 and General Motors gained 8.3% to US$2.09. DuPont rose 7.6% to US$25.23 and Alcoa gained 7.6% to US$8.18.

In Europe, the Dow Jones Stoxx 600 Index surged 4.9% to 188.11, led by a 23% jump for Allied Irish Banks and a 21% gain for Bank or Ireland. Germany's ThyssenKrupp jumped 16%.

The UK's FTSE 100 rose 4.3% to 4124.97 and France's CAC 40 climbed 5.4% to 2992.06. Germany's DAX 30 rose 6.1% to 4381.92.

The euro rose against the US dollar after the European Central Bank cut its benchmark interest rate a smaller-than-expected 25 basis points to 1.25% and reduced its overnight deposit rate by 25 basis points to 0.25%. ECB President Jean-Claude Trichet hinted that the main rate could be reduced again. Analysts had expected a 50 basis points cut.

The euro rose 1.8% to $1.3466 and gained 2.7% to $133.89. The dollar strengthened 0.8% to 99.42 yen.

Copper rose to a four-month high as the gain in US factory orders stoked demand for the metal used to make wire and pipes. Copper for delivery in three months rose 2.7% to US$4,170 a metric ton on the London Metal Exchange.

Crude oil had its biggest gain in three weeks amid optimism the G-20's decisions will help put a floor under the global economy. Crude for May delivery rose 8.8% to US$52.64 a barrel on the New York Mercantile Exchange.

Gold futures for June delivery fell 2% to US$908.90 an ounce in New York, as increased optimism about the global economy sapped demand for the precious metal.

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