While you were sleeping: Stocks rise, oil rebounds

Friday 11th December 2009

Shares edged higher on Wall Street and in Europe on renewed hopes for a global recovery and an easing of concerns about Greece's fiscal health.

At midday, the Dow Jones Industrial Average rose 0.77% to 10,417.01 and the Standard & Poor’s 500 gained 0.72% to 1103.79. The Nasdaq Composite rose 0.67% to 2198.43.

Alcoa, Walt Disney, Caterpillar paced the advance. Citigroup rose on hopes it will soon repay monies receieved as part of the U.S. government's bailout of the financial industry. United Technologies rose after a broker recommendation.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 2% to 22.20.

While the VIX has fallen 72% from its record high of 80.86 in November 2008, concern that the S&P500 has rallied too fast could lead to a surge in volatility in 2010, David Rosenberg told Bloomberg News.

Rosenberg, the chief economist at Gluskin Sheff & Associates, said he expected the VIX to rise to between 30 and 40 during 2010 because both the economy and corporate earnings might fail to meet expectations.

The VIX has averaged 20.29 during its two-decade history, data compiled by Bloomberg show.

The U.S. economy will expand by 2.6% next year and 2.8% in 2011, according to the average forecast of economists surveyed by Bloomberg. Investors are paying US$22.22 for each dollar earned by the combined S&P 500 companies over the last 12 months, the highest multiple since 2002.

The U.S. dollar rose against the euro amid concerns about credit ratings in Europe. Both the Aussie and the Kiwi rose on expectations the central banks in those two countries were poised to increase interest rates.

The euro slid 0.9% to US$1.4711. Against the yen, the U.S. dollar edged 0.5% higher to 88.29.

Investors in the greenback appeared to dismiss news that the U.S. trade deficit was much smaller in October than economists had forecast. It was US$32.94 billion, versus expectations of US$36.8 billion.

The greenback also seemed to pay little heed to the latest U.S. Labor Department report which showed continuing claims for jobless assistance fell.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.18% to 76.09.

Thirty-year bond yields rose four basis points to 4.46% at 11:22 a.m. in New York, according to BGCantor Market Data. The bond to be sold today yielded 4.50% in pre- auction trading.

Yields on two-year notes gained four basis points to 0.79%. The spread between 2- and 30-year debt was at 191 basis points at the end of 2008, and has averaged 132 basis points over the last five years, according to Bloomberg.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.063% to 267.92. While gold and copper fell, oil rebounded.

Gold slid in line with the rise in the U.S. dollar though analysts said the rally that had seen the price of the precious metal reach a record in recent weeks remained intact.

Spot gold was bid at US$1123.05 an ounce at 11.11am EDT, against US$1128.80 late in New York on Wednesday.

The price of copper extended its almost six-month decline amid a continuing rise in inventories and stalled demand. LME stockpiles have risen 34% since the end of September.

Copper futures for March delivery fell 3.65 cents, or 1.2%, to US$3.0875 a pound at 12:13 p.m. on the Comex unit of the New York Mercantile Exchange. The price was down for the sixth straight session.

As for oil, it edged higher alongside stock prices. U.S. crude for January delivery rose 28 cents to US$70.95 a barrel by 1537 GMT, after losing almost US$2 in its sixth straight day of losses on Wednesday, when it hit the lowest since early October at US$70.13. London Brent crude fell 8 cents to US$72.31.

In Europe, The Dow Jones Stoxx 600 Index rose 1% to 243.89l. Among national benchmarks, the U.K.’s FTSE 100 rose 0.78% to 5244.37, Germany’s DAX Index rose 1.08% to 5709.02 and France’s CAC 40 gained 1.09% to 3798.38.

National Bank of Greece and EFG Eurobank and Royal Bank of Scotland rallied after the European Union’s Jean-Claude Juncker said he ruled out Greece declaring bankruptcy. RBS rose after a Wall Street Journal report it was near the sale of some Asian assets to HSBC.

As expected the Bank of England and the national bank of Switzerland opted to keep their benchmark interest rates unchanged.

Businesswire.co.nz

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