While you were sleeping: Stocks rise on US home sales, oil gains, dollar falls

Tuesday 24th November 2009

Stocks advanced in the U.S. and Europe after American home sales rose more than expected and a Federal Reserve official suggested extending stimulus measures to underpin the economic recovery.

The U.S. dollar fell, while crude oil, copper and gold advanced.Sales of previously owned U.S. homes rose to the highest level in more than two years as buyers rushed to take advantage of a first-home buyer’s tax credit.

Sales jumped by a record 10.1% in October from September to an annual pace of 6.10 million units, according to the National Association of Realtors said. That exceeded the 5.7 million annual rate expected in a Reuters forecast. Home sales soared 23.5% from October 2008.

Federal Reserve Bank of St. Louis President James Bullard said the Fed should extend its ability to buy mortgage-backed securities and agency bonds beyond the proposed end of the scheme in March to ensure it has enough flexibility to react to any further downturn in the economy.

Bullard told reporters in New York that the Fed could keep the US$1.25 trillion programme active “at a very low level” instead of shutting them down permanently. “Initially it would do nothing for the economy, but it would give the Fed the option to react to future news as it comes in.”

Dominique Strauss-Kahn, managing director of the International Monetary Fund, told a Confederation of British Industry conference that the IMF doesn’t see “a high probability of a double dip” in the global economy.

The Dow Jones Industrial Average climbed 1.2% to 10442.71 and the Standard & Poor’s 500 gained 1.3% to 1105.75. The Nasdaq Composite rose 1.3% to 2174.56.

The Chicago Board Options Exchange Volatility Index, or VIX, known as Wall Street’s `fear gauge,’ fell 5.3% to 21.01.

Oil company Chevron rose 2.6% to US$78.80, leading the Dow higher, as the price of crude oil advanced. Exxon Mobil gained 1.8% to US$75.74.

Zions Bancorp, a regional U.S. bank, surged 15% to US$14.48, leading the S&P 500 higher after saying it will write down the value of securities in its investment portfolio, causing a pretax loss on which it expects to extract a tax refund.

In Europe, the Dow Jones Stoxx 600 rose 2% to 248.49 as the better-than-expected U.S. home sales data stoked optimism for worldwide growth and drove up shares of lenders and commodity companies.

France’s Societe Generale climbed 3.5% and BNP Paribas rose 3.4%, Germany’s Deutsche Bank surged 3.9% while the U.K.’s Royal Bank of Scotland gained 5% and Standard Chartered rose 4%.

Lloyds Banking Group climbed 3.8% after garnering strong demand for a 9 billion pound bond exchange offer, stoking speculation the British lender’s record share price issue this week will be well supported.The bond exchange was "significantly oversubscribed," according to the bank, which is 43% owned by the U.K. government.

BHP Billiton, the world’s biggest mining company, rose 3.5% and Rio Tinto, the third-largest, climbed 3.7% as commodity prices rallied. Royal Dutch Shell rose 2.2% as oil gained.

Copper rose to a new 14-month high in New York as the greenback weakened and the housing sales lifted optimism for demand for a metal used to make pipes and wire.

Copper for December delivery climbed 2.1% to US$3.1740 a pound on theNew York Mercantile Exchange.

Crude oil also advanced on the stronger housing data, which lifted optimism demand for fuel will rise as the world’s biggest economy picks up pace.

U.S. crude reached as high as US$79.92 a barrel and was recently up 74 cents to US$78.21.

Gold surged to a new record US$1,174 an ounce as the greenback weakened, stoking the appeal of the precious metal as an alternative investment.

Gold futures for December delivery gained 1.7% to US$1,166.20 an ounce in New York.

The Reuters/Jefferies CRB Index of 19 commodities rose 0.5% to 275.82.

The U.S. dollar and the yen declined on the housing data, which helped stocks rally and gave investors confidence to seek higher-yielding assets in other currencies.The dollar fell to $1.4969 per euro from $1.4862 on Friday in New York. Japan’s currency weakened to 133.32 per euro from 132.09. The yen retreated to 89.04 per dollar from 88.88.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.6% to 75.14.

Businesswire.co.nz

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