Wednesday, September 16, 2009

Stocks, Commodities Climb on Bernanke, Buffett; Dollar Declines

By Daniel Hauck

Sept. 16 (Bloomberg) -- Stocks climbed around the world and commodities advanced as Federal Reserve Chairman Ben S. Bernanke indicated the recession is over and billionaire investor Warren Buffett said he’s buying equities.

The Dow Jones Stoxx 600 Index of European shares added 1.2 percent to an 11-month high at 12:35 p.m. in London. Futures on the Standard & Poor’s 500 Index gained 0.4 percent. The MSCI Emerging Markets Index rose as much as 1.8 percent, more than doubling from a four-year low in October 2008. Lead rose for a third day on the London Metal Exchange and copper added 2.3 percent. The dollar fell against all but three of the 16 most- traded currencies tracked by Bloomberg.

Bernanke said yesterday in Washington that “the recession is very likely over,” while Buffett told a conference in Carlsbad, California yesterday that the economy is responding to government stimulus measures. The Group of 20 nations has committed about $12 trillion to reviving growth. Figures today are likely to show U.S. inflation remains subdued and that the housing market is improving.

“The bigger and uglier the bear market, usually the bigger the V,” Kenneth Fisher, who manages $28 billion as chief executive officer of Fisher Investments Inc. in Woodside, California, said in an interview. “A normal V-shaped recovery lasts one year, and the current rally started in March.”

Dollar Index

The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency against its major trading partners, dropped to the lowest level since Sept. 23, 2008, as signs the world’s biggest economy is emerging from recession prompted investors to buy higher-yielding assets. A report today may show the Fed’s measure of U.S. industrial production rose 0.6 percent last month, the most since October, according to the median of 75 economists’ forecasts in a Bloomberg survey.

The MSCI World Index of 23 developed nations has climbed 64 percent since March 9 as the Fed kept its target rate for overnight lending between banks at near zero to unlock credit markets after the bankruptcy of New York-based Lehman Brothers Holdings Inc. a year ago.

The MSCI World added 0.9 percent today, led by companies dependent on consumer spending and raw-material producers. The global gauge trades at 27.3 times the earnings of its 1,659 companies, the most expensive level since 2003.

Inditex SA rose 4.2 percent in Madrid as Europe’s largest clothing retailer reported earnings that beat analysts’ estimates. BHP Billiton Ltd., the world’s biggest mining company, added 2.3 percent as copper, lead and nickel climbed in London.

Buffett Buying

The increase in U.S. index futures indicated that the S&P 500 may extend an 11-month high. Indexes climbed yesterday as Buffett, known as the “Oracle of Omaha,” said his Berkshire Hathaway Inc. is currently buying stocks because “I am getting a lot for my money.”

Buffett built an equity portfolio valued at more than $48 billion by betting on companies including soft-drink maker Coca- Cola Co. and Kraft Foods Inc. that he believes have competitive advantages and enduring brand popularity.

The MSCI Emerging Markets Index advanced to the highest level in more than a year. South Korea’s Kospi index led the advance among Asian developing nations, rising 1.8 percent as exporters including Samsung Electronics Co. and Hyundai Motor Co. rallied. Indonesia’s rupiah climbed 1.2 percent to the highest level in 11 months and the government’s benchmark 10- year notes gained after Moody’s Investors Service raised the nation’s credit rating. Hungary’s BUX index added 2.6 percent.

Metals Rally

Metals advanced in London. Lead, used mainly in auto batteries, climbed 4.1 percent to $2,255 a metric ton. Platinum and palladium rallied to one-year highs on speculation vehicle- scrapping programs in the U.S. and Europe will revive car demand. Automakers account for about 60 percent of platinum and palladium use.

Treasuries rose for the first time in three days, with the yield on the benchmark 10-year note falling 4 basis points to 3.42 percent, as the absence of inflation in the U.S. economy encouraged investors to buy fixed-income securities. Consumer prices declined 1.7 percent in August from a year earlier, almost the biggest drop since 1950, the Labor Department will say today, according to the median of 38 forecasts in a Bloomberg survey.

Pimco, Mervyn King

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., increased holdings of government-related debt last month to the most in five years and cut mortgage securities. Gross boosted the $177.5 billion Total Return Fund’s investment in Treasuries, so-called agency debt and other bonds linked to the government to 44 percent of assets, the most since August 2004, from 25 percent in July, according to Pimco’s Web site. The fund cut mortgage debt to 38 percent, the lowest level since February 2007, from 47 percent.

U.K. government bonds advanced, sending the yield on the two-year gilt 4 basis points lower to 0.69 percent, the lowest level since at least 1992, after Bank of England Governor Mervyn King said yesterday policy makers are considering cutting the rate paid to financial institutions on deposits at the central bank.

Sentiment among stock investors deteriorated from Tokyo to Paris and New York on speculation the rally in stocks has outstripped the prospects for earnings.

Optimism for equities fell in seven of 10 countries in the Bloomberg Professional Confidence Survey. Users expect stocks to slide during the next six months in the U.S., Japan and Spain, while investors in Brazil and the U.K. were the most bullish. Sentiment had improved in all 10 nations in August.

Sentiment on equities dropped even as confidence in the world economy held at a record high in September.

The Bloomberg Professional Global Confidence Index rose to 58.54 this month from 58.12 in August. The index exceeded 50 for a second month, which means optimists outnumbered pessimists. Measures of confidence in France and Germany surged after their economies unexpectedly returned to growth last quarter.

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