Dollar and US govt bonds decline on QE2
Stocks and commodities climbed, driving global indexes to two-year highs, after the Federal Reserve expanded bond purchases and earnings beat analysts’ estimates. The dollar and 30-year government bonds declined.
The MSCI World Index gained 1.3 per cent at 8:33 am in New York, reaching the highest level since September 26, 2008. Futures on the Standard & Poor’s 500 Index rose 0.9 per cent. The Dollar Index fell as much as 0.9 per cent to an 11-month low. Five-year Treasuries advanced while 30-year bonds retreated, driving the difference in yields to a record. Irish 10-year notes tumbled for an eighth day, the longest run of declines since January 2009. The S&P GSCI index of 24 commodities climbed 1.4 per cent.
The Fed’s $600 billion bond-buying program reinforced optimism the world economy won’t deteriorate and corporate profits will improve. The Bank of England said it kept a 200 billion-pound ($324 billion) asset-purchase plan today before the European Central Bank releases its monetary policy decision. BNP Paribas SA, the world’s biggest bank by assets, reported a 46 per cent jump in third-quarter profit, and Qualcomm Inc, the largest maker of mobile-phone chips, forecast higher earnings.
“Financial markets have a fresh liquidity injection to fuel risk appetite,” said Graham Bishop, an equity strategist at Royal Bank of Scotland Group Plc in London. “There is now a real chance of a rally into year-end. The micro newsflow has again showed strength through the results season.”
The Fed’s plan to inject more cash into the economy led silver to a 20-year high and emerging-market stocks to the highest level since June 2008. The dollar fell against all 16 of its major peers, losing 0.7 per cent against South Africa’s rand.
Swiss Re, BHP
The Stoxx Europe 600 Index rose 1.4 per cent to its highest level since April 26. BNP Paribas jumped 4.2 per cent and Unilever rallied 5.1 per cent. Swiss Reinsurance Co jumped 5.7 per cent as it agreed to repay the capital injected last year by Warren Buffett. HeidelbergCement AG soared 7.2 per cent as profit beat estimates.
BHP Billiton rose 5 per cent to a record in London after Canada blocked its $40 billion hostile takeover for Potash Corp of Saskatchewan Inc. Potash Corp sank 3.8 per cent in pre-market trading. Rolls-Royce Group Plc lost 3.4 per cent after one of its engines exploded in mid-flight, forcing Qantas Airways to ground its Airbus SAS A380 fleet. Airbus owner European Aeronautic Defence & Space Co fell 3.2 per cent.
The MSCI Emerging Markets Index advanced 1.1 per cent, heading for the highest closing level since June 2008. India’s Bombay Stock Exchange Sensitive Index surged 2.1 per cent to a record. Coal India rallied 40 per cent in its trading debut after selling $3.4 billion shares in the nation’s largest initial public offering last month. The Shanghai Composite Index jumped 1.9 per cent, while indexes in Thailand, South Africa, Turkey, Poland and Hungary increased more than 1 per cent.
Qualcomm, Whole Foods
The gain in US futures indicated the S&P 500 may extend yesterday’s 0.4 per cent advance. Qualcomm soared 7.2 per cent in German trading after profit beat estimates. Whole Foods Market, the largest US natural-goods grocer, surged 9.4 per cent after raising its forecast.
