While you were sleeping: Stocks, commodities rally as G-20 keeps money cheap

Tuesday 10th November 2009

Stocks rallied on Wall Street and in Europe, while the U.S. dollar weakened after Group of 20 finance ministers and central bankers agreed to maintain economic stimulus measures until they’re certain the recovery is underway.

U.K. Chancellor of the Exchequer Alistair Darling said the G-20 nations agreed to keep interest rates low and keep running large budget deficits to ensure global growth returned. G-20 leaders failed to agree on a so-called Tobin tax on financial trading.

The Dow Jones Industrial Average gained 1.9% to 10213.94 and the Standard & Poor’s 500 advanced 2% to 1090.44%. The Nasdaq Composite rose 1.8% to 2149.73.

American Express climbed 4.9% to US$39.03, leading the Dow higher. Caterpillar gained 4.1% to US$59.93 and Bank of America rose 4.1% to US$15.67.

Barrick Gold, the world’s largest gold miner, rose 2.4% to US$42.63 after the price of gold jumped to a new record.

Freeport-McMoRan Copper & Gold surged 4.5% to US$83.15 as the price of copper advanced.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 1.3% to 23.54, as it became cheaper to use options to insure against declines in stocks.

A Federal Reserve survey showed fewer banks tightened lending criteria in the third quarter compared with three months earlier, underpinning improvements in the economy.

Still, the Fed’s Senior Loan Officer survey showed demand for most types of loans hasn’t yet picked up and banks are yet to ease lending terms.

Goldman Sachs Group will underwrite a US$400 million sale of bonds backed by an Ohio real estate company’s shopping centres - the first such sale to tap the Federal Reserve’s Term Asset Backed Securities Loan Facility since the facility was widened to include commercial mortgage-backed securities in June, Bloomberg reported.

The bond is backed by 28 properties owned by Developers Diversified Realty Corp., according to the report.

Fannie Mae is considering whether to write down US$5.2 billion in low-income housing tax credits after the U.S. Treasury vetoed its application to sell the assets.

The Treasury decided against allowing Goldman Sachs to buy the credits because the cost to the taxpayer would be greater than the benefit to the mortgage finance company.

In Europe, the Dow Jones Stoxx 600 gained 1.9% to 245.74. Among national benchmarks, the U.K.’s FTSE 100 rose 1.8% to 5235.18, with trading on the London Stock Exchange Group affected by a trading system glitch.

Cadbury Plc edged up 0.4% after the chocolate maker rejected Kraft Foods’ 9.8 billion pound takeover offer, unchanged from its initial proposal in September for 300 pence in cash and 0.2589 new Kraft shares per Cadbury share.

Germany’s DAX 30 gained 2.4% to 5619.72 as Economy Ministry figures showed industrial production jumped 2.7% in September, beating estimates.

France’s CAC 40 rose 2.1% to 3785.49 after the Bank of France forecast economic growth of 0.5% in the fourth quarter and business confidence climbed.

Allianz climbed 4.3% after posting third-quarter profit, excluding the sale of Dresdner Bank, jumped to 1.32 billion euros from 545 million euros.

BHP Billiton gained 4.2% and Rio Tinto rose 4.3% as prices of metals advanced.

Copper rallied after the G-20 agreed to maintain its stimulus measures and the U.S. dollar sank.

Copper futures for December delivery rose 1.3% to US$2.9915 a pound on the New York Mercantile Exchange.

Crude oil rose as Hurricane Ida threatened oil platforms in the Gulf of Mexico, forcing operators including BP Plc to reduce output.

Crude for December delivery rose 2% to US$78.95 a barrel on the New York Mercantile Exchange.

Gold rose to a record US$1,111.70 as the greenback tumbled, stoking demand for the precious metal as an alternative investment.

Gold futures for December delivery rose 1.1% to US$1,108.10 an ounce in New York.

The dollar and the yen weakened as stocks rallied and G-20 leaders pledged to continue their stimulus measures, stoking investors’ risk appetite.

The dollar fell to US$1.4991 against the euro from US$1.4847 last week and earlier weakened to US$1.5020. The euro climbed to 134.99 from 133.45. The dollar traded at 90.04 yen from 89.88.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 1% to 75.04.

Businesswire.co.nz

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