The dollar weakened on concern that the Federal Reserve will signal it has no intention of raising interest rates with the global economy in its worst recession since World War II. Metals rose, buoying emerging-market stocks.
The U.S. currency lost 0.2 percent against the euro at 9:50 a.m. in London, 1 percent versus the Norwegian krone and 0.9 percent compared with the New Zealand dollar. Copper led an advance in industrial metals. The MSCI Emerging Markets Index rose 1.9 percent, the biggest increase in two weeks, and the Dow Jones Stoxx 600 Index of European shares rebounded from its worst two-day decline since April.
“Speculation about ongoing low-rate policy by the Fed is a burden to the U.S. dollar,” a team of analysts led by Viola Stork at Helaba Landesbank Hessen Thueringen in Frankfurt wrote in a research note today. There is an “expectation that the Fed is not going to signal any change in its rate policy today,” the report said.
The chances that the U.S. central bank will increase its target interest rate for overnight loans by the end of the year diminished to 40 percent from 50 percent a week ago, based on trading in Fed funds futures. Policy makers’ determination to prop up the world’s biggest economy prompted investors to seek higher returns outside the U.S. The Organization for Economic Cooperation and Development said today the world’s most- industrialized economies will contract 4.1 percent this year and grow 0.7 percent in 2010.
Stoxx 600
The Stoxx 600 index rose 0.7 percent after retreating 5.5 percent since June 11 on speculation share prices have outpaced the outlook for profit growth. The three-month rally drove valuations to 25.4 times earnings, the highest level since 2004.
A gauge of technology shares in the Stoxx 600 added 1.6 percent after Redwood City, California-based Oracle Corp., the world’s second-largest software maker, reported fourth-quarter profit that topped analysts’ estimates. Walldorf, Germany-based SAP AG, the world’s biggest maker of business-management software, advanced 1.4 percent to 28.43 euros.
Oracle added 2.1 percent in German trading, while futures on the Standard & Poor’s 500 Index rose 0.3 percent.
The MSCI Emerging Markets index rebounded after a retreat that sent the 22-country benchmark down as much as 10.4 percent from its 2009 high. The gauge is up 48 percent since February on speculation interest-rate cuts and stimulus packages from the U.S. to China will spur a global recovery.
Russia’s Micex Index increased 4 percent today, the most since June 1, as OAO GMK Norilsk Nickel rallied following gains in nickel and copper. Taiwan’s Taiex Index jumped 3 percent after the government said it will discuss details of a financial agreement with China next week.
Copper Rises
Copper for delivery in three months rose 2.3 percent to $4,915 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also advanced. Gold for immediate delivery added 0.2 percent to $928.08 an ounce, for a second increase.
The yen weakened for the second day against the euro, losing 0.3 percent, after the Japanese government said the decline in exports accelerated in May. Shipments abroad slumped 40.9 percent from a year earlier, after falling 39.1 percent in April.
The Fed is balancing the need to keep interest rates near 0 percent to stoke economic growth with the risk of faster inflation.
Orders for U.S. durable goods probably fell in May for the second time in three months, economists said before a report today, while data in recent weeks showed industrial capacity in use dropped to the lowest level since records began in 1967 and the unemployment rate approached 10 percent.
Inflation will quicken in coming months, based on the so- called breakeven rate, the difference between yields on 10-year Treasuries and inflation-linked notes. The rate rose to 1.84 percentage point from 1.41 percentage point at the start of last month, according to data compiled by Bloomberg. U.S. consumer prices fell an annual 1.3 percent, the most since 1950, according to the Labor Department.
Source: Bloomberg.
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