Treasury 30-year bonds reached a record yield premium over 10-year notes amid speculation the Federal Reserve will concentrate on purchases of medium-term debt as it tries to keep down borrowing costs.
The longest maturities, the most sensitive to inflation expectations, also lagged behind shorter-term notes after the Fed said it’s prepared to ease monetary policy to spur the economy. Bank of America Merrill Lynch said Fed bond purchases would be attacking the wrong problem. Ten-year notes fell before the U.S. sells $21 billion of them in the second of three sales of $66 billion of notes and bond this week. Stocks rose.
“A tempering of the disinflation expectations and the expectations of the Fed buying shorter-dated securities is weighing on 30-year” debt, said Christian Cooper, head of U.S. dollar derivatives trading in New York at Jefferies & Co., one of 18 primary dealers that trade with the central bank. “As disinflation has come off the table, it forces a reevaluation of where the back end should be.”
Ten-year yields, a benchmark for everything from home mortgages to corporate bonds, rose three basis points, or 0.03 percentage point, to 2.46 percent at 10:48 a.m. in New York, according to BGCantor Market Data. The 2.625 percent note due in August 2020 fell 7/32, or $2.19 per $1,000 face amount, to 101 14/32.
Yields on 30-year bonds increased three basis points to 3.85 percent. The difference between the two rates reached 1.4 percentage points, the most since Bloomberg started tracking the figures in 1977. Two-year note yields fell 1 basis point to 0.36 percent. It was the first trading day this month they failed to reach or match a record low.
Note Auction
The 10-year securities scheduled for sale today yielded 2.461 percent in pre-auction trading, compared with 2.67 percent the last time the notes were sold on Sept. 8.
Thirty-year bonds have lost 1.76 percent this month, versus a 0.92 percent gain by 10-year Treasuries, according to Bank of America Merrill Lynch indexes. The 10-year yield dropped to 2.33 percent on Oct. 8, the least since January 2009, as speculation mounted that the Fed will announce a resumption of its program of asset purchases as soon as next month to boost the economy.
The central bank’s policy-setting Federal Open Market Committee last month was prepared to ease monetary policy in a process known as quantitative easing “before long” and focused on purchases of Treasuries and boosting inflation expectations as ways to add stimulus, according to minutes released yesterday of the Sept. 21 session.
November Start
The Fed may resume its quantitative easing program in November, when it next meets, BNP Paribas SA said today. Policy makers are likely to announce “an initial purchase amount of $500 billion in long-term securities,” Yelena Shulyatyeva, an economist in New York, wrote in a research report.
Quantitative easing aims at the wrong problem, according to strategists at BofA Merrill Lynch.
“Count us as skeptical if not on the likelihood of QE2 then certainly on its effectiveness,” strategists led by Jeffrey Rosenberg in New York wrote in a note to clients dated yesterday. “It is not the supply or cost of credit that is currently the deterrent to economic activity. Rather, confidence remains low, suppressing investment and demand for credit.”
The spread between yields on 10-year notes and Treasury Inflation Protected Securities, an indication of inflation expectations, widened 0.04 percentage point to 2.03 percentage points. The five-year average is 2.10 percentage points.
The Standard & Poor’s 500 Index rose 0.7 percent.
Treasury Auctions
Longer-term Treasuries fell before today’s auction of 10- year debt. Yesterday’s sale of $32 billion in three-year notes drew bids for 2.95 times the amount sold, the least since February.
“Stocks are up this morning, which is helping the market set up for the 10-year auction after yesterday’s saw tepid demand,” said Martin Mitchell, head government bond trader at the Baltimore unit of Stifel Nicolaus & Co., a St. Louis-based brokerage firm. “The street is trying to pressure us lower, but there will be more demand for the 10-year note than for the 3- year note yesterday due to the expectations for QE buying in that part of the curve.”
Investors bid for 3.21 times the amount of 10-year notes on offer last month, versus the average of 3.10 for the past 10 auctions. Indirect bidders, the group that includes foreign central banks, bought 54.7 percent of the debt, while the 10- sale average is 40 percent.
‘Cautious’ Bidders
“Was yesterday’s auction a sign that the market has overshot itself ahead of QE, especially with the FOMC minutes hinting QE is on the horizon?” Justin Lederer and Amrut Bharambe, interest-rate strategists in New York at Cantor Fitzgerald LP, wrote in a note to clients. “Or is this backup ahead of the long-end supply a market correction that is desperately needed? Regardless of either scenario, we believe bidders will be cautious today.”
The $13 billion 30-year auction tomorrow will round out debt this week’s offerings of notes and bonds.
To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net.
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NYSE Euronext, which operates markets in Paris , Lisbon, Amsterdam and Brussels, suspended trading after experiencing technical problems.
“NYSE Euronext is currently experiencing technical issues and has decided to halt the market for Equities & Bonds, Warrants & certificates and ETFs,” the company said on its website today. “We are working to resolve this issue and we will provide an update as soon as possible.”
A spokesman for NYSE Euronext declined to comment beyond the statement.
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The Australian dollar climbed to its highest level since it began trading freely in 1983 as a gain in global stocks encouraged demand for higher-yielding assets.
The Aussie and New Zealand’s kiwi dollar rose against the yen as reports showing a rebound in Australian consumer confidence and an unexpected increase in Japanese machinery orders buoyed optimism in the Asia-Pacific economy.
“Solid performance on the stock market spurs risk sentiment,” said Toshiya Yamauchi, a senior currency analyst at Ueda Harlow Ltd. in Tokyo.
Australia’s currency climbed 0.6 percent to 99.25 U.S. cents at 11:08 a.m. in New York, from 98.63 cents yesterday, after touching a record 99.29 U.S. cents. The currency gained 0.7 percent to 81.14 yen, from 80.59. New Zealand’s dollar appreciated 1 percent to 76.27 U.S. cents, from 75.52. It advanced 1.1 percent to 62.36 yen, from 61.71 yen.
The sentiment index for Australia rose 3.3 percent to 117 this month, after a 5 percent drop in September, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers conducted Oct. 4-10 and released today in Sydney.
Japan’s machine orders rose 10.1 percent in August from July, when they increased 8.8 percent, the Cabinet Office said today in Tokyo. The median forecast of 28 economists surveyed by Bloomberg News was for a 3.9 percent decrease.
The Standard & Poor’s 500 Index climbed 0.8 percent, touching a five-month high as Intel Corp. and JPMorgan Chase & Co. reported better-than-estimated results. Crude oil for November delivery rose 1.8 percent to $83.10 a barrel.
Fed Speculation
The Aussie also advanced versus the greenback on mounting expectations for additional purchases of debt by the Federal Reserve, known as quantitative easing.
Policy makers “wanted to consider further the most effective framework for calibrating and communicating any additional steps to provide such stimulus,” the Fed said in minutes of its Sept. 21 meeting, released yesterday in Washington. The central bank also said for the first time that it was considering targeting a path for the level of nominal gross domestic product as a way to increase price expectations.
“The Fed was poised to restart quantitative easing,” wrote John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney, in a note to clients. “The top end of our short-term model’s fair-value range for the AUD/USD has risen to 1.0 for the first time since May 2008.”
Benchmark interest rates are 4.5 percent in Australia and 3 percent in New Zealand, compared with as low as zero in Japan and the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Australian bonds fell, with the yield on the benchmark 10- year note rising 0.02 percentage point to 5 percent, according to data compiled by Bloomberg. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose 0.005 percentage point to 3.75 percen
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Emirates Telecommunications Corp., the United Arab Emirates’ largest phone company, plans to borrow more than $9 billion to buy shares in Mobile Telecommunications Co., three bankers familiar with the deal said.

The financing to acquire a stake in Zain, as the Kuwaiti phone company is known, would be the largest acquisition loan by a company in the Middle East and Africa since at least 1999, according to data compiled by Bloomberg. It may take the form of a short-term bridge loan that will be replaced with longer-term financing, said the bankers, who declined to be identified as the discussions are private.
Emirates Telecom, known as Etisalat, started talks with banks to finance the deal, Al-Bayan reported today citing Chief Financial Officer Salem Al-Sharhan. Jamal Al-Jarwan, chief executive officer of Etisalat’s international investments department, couldn’t be reached for comment.
The Abu Dhabi-based company will take out loans, sell international bonds or a combination, according to the report in Al-Bayan which didn’t identify lenders. Etisalat won’t need financing from the government, according to the newspaper.
Etisalat last month offered to buy 46 percent of Zain in a deal valuing the company at about $11 billion. National Bank of Kuwait SAK, an adviser to Etisalat on the acquisition, is also arranging loans to finance it, Kuwait news agency KUNA reported, citing National Bank’s Chief Executive Officer Ibrahim Dabdoub.
The deal would give Etisalat majority control of Zain and extend its reach in the Middle East, where Zain operates in countries from Kuwait and Iraq to Bahrain. Etisalat offers telecommunications services in 18 countries in the Middle East, Africa and Asia, counting more than 100 million customers, according to its website. The seven emirates of the U.A.E make up about 86 percent of Etisalat’s sales.
Etisalat had 11.3 billion dirhams ($3.08 billion) of cash at the end of last year, earnings statements show.
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Canadian stocks rose for a third day as North American companies including CSX Corp. reported earnings that topped analyst estimates and gold futures gained on a weaker U.S. dollar.
Canadian National Railway Co., Canada’s largest railroad, advanced 1.9 percent after U.S. railroad CSX said third-quarter profit increased 43 percent. Barrick Gold Corp., the world’s biggest gold producer, climbed 1 percent as the U.S. dollar dropped to a five-month low against the Canadian currency. Teck Resources Ltd., Canada’s largest base-metals and coal producer, rallied 1.8 percent on prospects for higher copper prices.
The Standard & Poor’s/TSX Composite Index rose 97.31 points, or 0.8 percent, to a two-year high of 12,672.95 as of 10:08 a.m. in Toronto.
The S&P/TSX is on track to record its fifth-straight weekly gain for the first time since April 2009. An index of commodities gained 8.3 percent during the streak through yesterday as the U.S. dollar declined 6.5 percent on concerns that new stimulus measures will weaken the currency. Energy and raw-materials companies make up 48 percent of Canadian stocks by market value.
The U.S. dollar retreated as much as 0.8 percent to C$1.0021 after Statistics Canada said new-home prices rose 0.1 percent in August after slipping 0.1 percent in July. Six of the nine analysts in a Bloomberg survey had forecast another decline.
Gold Climbs
Gold futures gained 1 percent to $1,360.60 an ounce in New York. Also today, Canadian gold producers including Barrick, Goldcorp Inc. and Kinross Gold Corp. received “outperform” ratings in new coverage from Tony Lesiak, an analyst at Macquarie Group Ltd.
Barrick advanced 1 percent to C$49.46. Goldcorp, the world’s second-largest producer by market value, increased 1.5 percent to C$45.10. Detour Gold Corp., which mines in northern Ontario, led the S&P/TSX with a 5.4 percent surge to C$30.29.
Canada’s two publicly traded railroads climbed after Jacksonville, Florida-based CSX surpassed analysts’ average third-quarter profit estimate by 3.8 percent, excluding certain items. Meanwhile, Tasneem Azim, an analyst at UBS AG, raised his rating on Canadian Pacific Railway Ltd. to “buy” from “neutral,” citing the company’s cost cuts and valuation compared to other railroads.
Canadian National rose 1.9 percent to C$66.90. CP rallied 3.7 percent to a two-year high of C$66.60.
Mining Shares Rally
An index of S&P/TSX base-metals and coal companies advanced to a record level as copper increased to a 27-month high. Prices may gain more than 10 percent this quarter from the prior three months as demand outpaces supply, a South Korean state purchasing agency said.
Teck gained 1.8 percent to C$45.50. First Quantum Minerals Ltd., Canada’s second-largest publicly traded copper producer, climbed 2 percent to C$83.10. Taseko Mines Ltd., which produces copper in British Columbia, jumped 4.8 percent to C$6.80, the highest price since 1997.
Royal Bank of Canada, the country’s largest bank, gained 1.2 percent to C$55.63. Bank of Montreal, the No. 4 bank by assets, advanced 1.1 percent to C$60.48. Manulife Financial Corp., North America’s third-biggest insurer, increased 0.9 percent to C$12.54.
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China’s stocks rose for a fifth day, extending the benchmark index’s bull market rally, after exports climbed last month and the government said it will promote sales of construction material in rural areas.
China Vanke Co. and Poly Real Estate Group Co. jumped at least 6.8 percent, leading a gauge of property stocks to the biggest gain in almost five months. Anhui Conch Cement Co., the largest cement maker, advanced to the highest in two months on the prospect higher sales will boost earnings. SAIC Motor Corp. paced gains among automakers after domestic vehicle sales accelerated last month.
“China’s economy will grow steadily as there’s no major worry over a big slump in external demand,” said Zhang Ling, a fund manager at Shanghai River Fund Management Co. “The market is becoming more optimistic about the economy.”
The Shanghai Composite Index climbed 19.95, or 0.7 percent, to 2,861.36 at the 3 p.m. close, the highest since May 5. The CSI 300 Index added 1.4 percent to 3,217.58. The Shanghai gauge has rebounded 21 percent from the 2010 low on July 5, surpassing the threshold some investors consider the beginning of a bull market, on signs that economic growth will remain resilient.
The nation’s exports rose 25.1 percent from a year earlier and imports climbed 24.1 percent, the customs bureau said on its website today. China posted a $16.9 billion trade surplus for September, capping the largest quarterly excess since the financial crisis in 2008 as pressure mounts for a stronger yuan.
A measure of property stocks jumped 4.2 percent, the most since May 24. Vanke, the biggest listed property developer, jumped 6.8 percent to 9.40 yuan. Poly Real Estate, the second largest, surged the 10 percent daily limit to 15 yuan. Gemdale Corp., the four largest, climbed 7.3 percent to 7.33 yuan.
Low Valuations
The property gauge has slumped 20 percent this year, the worst performer among the five industry groups of the Shanghai Composite, after the government raised down payment and suspended loans for third-home purchases.
“Valuations of property stocks are low,” said Shen Aiqin, an analyst at GF Securities Co. in Guangzhou, who has an “overweight” rating on the property industry. “As investors turn more optimistic about the economy, these cyclical stocks such as developers are what investors buy aggressively.”
Chinese banks extended 595.5 billion yuan ($89 billion) in new local-currency loans last month, the People’s Bank of China said today. That compared with the median 500 billion yuan forecast in a Bloomberg News survey of 18 economists. M2, the broadest measure of money supply, rose 19 percent in September from a year earlier, the central bank added. That compared with economists’ 18.9 percent median estimate.
Low Valuations
China will become “extremely cautious” in raising interest rates in order to prevent hot money inflows and to control the pace of yuan appreciation, Zhang Monan, a researcher with the State Information Center, wrote in a commentary published in the China Securities Journal newspaper today.
Anhui Conch paced the advance for cement produces, rising 4 percent to 25.78 yuan, the biggest gain since Aug. 5. Gansu Qilianshan Cement Group Co. added 3.4 percent to 18.97 yuan. Tangshan Jidong Cement Co. advanced 5.3 percent to 24.28 yuan.
China will start trials of a program to promote sales of construction materials, focusing on cement, in rural areas, the Ministry of Housing and Urban-Rural Development said yesterday after the market closed.
SAIC, China’s largest carmaker, surged 4.7 percent to 19.84 yuan. FAW Car Co., which makes passenger cars in China with Volkswagen AG, gained 5.1 percent to 21.85 yuan.
Wholesale deliveries of passenger cars rose 19.3 percent to 1.21 million, accelerating from 18.7 percent in August, the China Association of Automobile Manufacturers said in an e- mailed statement yesterday.
Consumer Stocks
Kweichow Moutai Co., China’s biggest producer of baijiu liquor by market value, led consumer stocks lower on concern recent gains were excessive. An index tracking consumer staples producers fell 1.8 percent, the most since Sept. 29 and the biggest loss among the CSI 300’s 10 industry groups. The consumer gauge has rallied 4.9 percent this year, compared with a 10 percent loss by the broader measure.
Kweichow Moutai dropped 3.4 percent to 161 yuan. The stock last week climbed to its highest level in 10 months. Wuliangye Yibin Co., the second biggest, lost 3.2 percent to 33.15 yuan. Tsingtao Brewery Co., the nation’s second-largest brewery by volume, slid 4 percent to 36.97 yuan.
Asia’s Worst
The Shanghai Composite is Asia’s worst performer this year, with a 13 percent decline through yesterday as the government boosted measures to slow the economy and cool property prices. At the same time, Indonesia’s Jakarta Composite Index rallied 40 percent, Thailand’s SET Index jumped 33 percent and Malaysia’s FTSE Bursa Malaysia KLCI Index rose 17 percent.
China stocks will extend their rally as investors increase purchases in a market that lagged behind gains in Asia, according to Templeton Asset Management Ltd.’s Mark Mobius.
The Shanghai index’s rise above its 200-day moving average is a “positive sign” that signals further gains for the benchmark gauge, according to Schaeffer’s Investment Research.
The moving average may climb to April highs after the Chinese stock gauge exceeded the average for the first time in about six months yesterday, said Ryan Detrick, a Cincinnati- based analyst who studies chart patterns to predict prices at Schaeffer’s Investment. The 200-day moving average rose as high as 3,097 in April, according to data compiled by Bloomberg.
--Zhang Shidong. Editor: Allen Wan, Richard Frost
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Asian stocks rose, sending the regional equity benchmark to its biggest gain in five days, as reports from China, Japan and Australia showed the economic recovery is strengthening.
Fanuc Ltd. in Tokyo and Anhui Conch Cement Co. in Hong Kong gained at least 2.3 percent after Japanese machinery orders rose more than expected and the Chinese government said it will promote sales of construction material in rural areas. Hynix Semiconductor Inc., the world’s second-largest maker of computer memory chips, advanced 3.5 percent as Intel Corp. predicted fourth-quarter sales that beat analysts’ estimates. Chinese banks in Hong Kong gained after data showed lending last month unexpectedly increased.
The MSCI Asia Pacific Index rose 0.6 percent to 129.50 as of 7:28 p.m. in Tokyo, with all 10 industry groups increasing. About two stocks advanced for each that fell on the nearly 1,000-member gauge. The measure has advanced 2.4 percent this month on speculation central banks around the world will increase efforts to boost economic growth.
“The Asian market is determined by the stability of China’s economy and the data seems to suggest that China’s economy in the fourth quarter will be stable, so the outlook overall for Asia is pretty good,” said Steve Tse, a Hong Kong- based research manager at BEA Union Investment Management, which oversees $4.5 billion.
Hong Kong Advances
The S&P/ASX 200 Index gained as much as 0.8 percent in Sydney after Australian consumer confidence rebounded in October, according to a Westpac Banking Corp. and Melbourne Institute survey today.
Japan’s Nikkei 225 Stock Average climbed 0.2 percent while the broader Topix index declined 0.2 percent toward the end of the trading session as pessimism over Japan’s domestic economic outlook overshadowed gains by exporters on expectations the U.S. Federal Reserve will act to shore up the economy.
Hong Kong’s Hang Seng Index rose 1.5 percent to the highest level since June 2008 as China’s central bank showed the country’s banks extended 595.5 billion yuan ($89 billion) of new loans last month. The gauge fell by as much as 0.4 percent earlier, led by developers, after Chief Executive Donald Tsang said the city would act to make housing more affordable.
Futures on the Standard & Poor’s 500 Index climbed 0.5 percent. The U.S. equity benchmark rose 0.4 percent to 1,169.77 yesterday after minutes of the Federal Reserve’s meeting last month showed the central bank was prepared to buy more government debt to stabilize the recovery.
Machinery Orders
“If the Fed takes more steps to spur the U.S. economy, it will also boost the export-driven Asian economy and markets in the region,” said Michiya Tomita, a Hong Kong-based fund manager at Mitsubishi UFJ Asset Management Co., which oversees $65 billion globally.
Fanuc, Japan’s No. 1 maker of industrial robots, gained 2.3 percent to 11,010 yen. Komatsu Ltd., a maker of heavy machinery, climbed 0.9 percent to 1,909 yen.
Japanese machinery orders rose 10.1 percent from July, the largest increase since December, the Cabinet Office said today in Tokyo. The median forecast of 28 economists surveyed by Bloomberg News was for a 3.9 percent decline. The data is an indicator of business investment in three to six months.
Anhui Conch Cement, a Chinese maker of construction materials, rallied 7.8 percent to HK$36.50 in Hong Kong. China National Building Material Co., a producer of fiberglass and dry wall, jumped 10 percent to HK$19.92.
China Exports
China will start trials of a program to promote sales of construction materials in rural areas, the Ministry of Housing and Urban-Rural Development said in a statement on its website yesterday. The trials, focusing on cement, are taking place in the provinces of Shandong and Ningxia, according to a statement dated Sept. 29 and posted to its website today.
Exports in China, the world’s fastest growing major economy, rose 25.1 percent from a year earlier and imports climbed 24.1 percent, the customs bureau said on its website today.
Hynix increased 3.5 percent to 23,400 won in Seoul and Advanced Semiconductor Engineering Inc. rose 3.3 percent to NT$24.75 in Taipei. Tokyo Electron Ltd., the world’s No. 2 semiconductor-equipment maker, gained 1.3 percent to 4,550 yen.
Intel, the world’s biggest chipmaker, said revenue for the fourth quarter will be $11.4 billion, plus or minus $400 million. Corporations and households in less developed markets bought more computers, helping the company weather slumping demand among consumers in the U.S. and Europe, Intel Chief Financial Officer Stacy Smith said in an interview.
‘Sustainable Rally’
Hon Hai Precision Industry Co., the world’s largest contract maker of electronics, gained 1.3 percent to NT$114.50 in Taiwan. The Commercial Times reported that the company raised manufacturing prices from this month for its largest clients including Apple Inc., Nokia Oyj, Microsoft Corp. and Sony Ericsson Mobile Communications AB.
The MSCI Asia Pacific Index has risen 7.5 percent this year on speculation growth in profit will weather Europe’s debt crisis, Chinese steps to curb property-price inflation and concern about the pace of the U.S. economic rebound. Stocks in the gauge trade at 14.2 times estimated profit on average, compared with 13.9 times for the S&P 500 and 12 times for the Stoxx Europe 600 Index.
Chinese banks rose in Hong Kong today after the People’s Bank of China said new local-currency lending was 595.5 billion yuan last month. That compared with the median 500 billion yuan forecast in a Bloomberg News survey of 18 economists.
Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, rose 2 percent to HK$6.05. China Construction Bank Corp., the country’s second-largest bank, advanced 2.6 percent to HK$7.17. Bank of China Ltd., the nation’s fourth- largest bank by assets, increased 2.6 percent to HK$4.36.
“The growth in the Chinese lending data helped boost sentiment in the banks,” said Derrick Tan, a sales trader at Citic Securities Hong Kong Co. “The rally in Hong Kong looks sustainable even with the index above 23,000 due to prospects of further quantitative easing.”
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Turkey’s main stock index, the world’s second-best performer in the past month, may ignore “overbought” technical indicators and gain another 11 percent from its current record, leading emerging markets in breaching technical barriers, according to Auerbach Grayson & Co.
Turkey’s ISE 100 index may reach 73,200 by year-end, after closing at a record 69,675.08 yesterday, with an “upside” of 77,664, representing a 150 percent Fibonacci projection from a previous peak set in October 2007 to November 2008 low, said Richard Ross, a global technical strategist at Auerbach.
The ISE 100’s 14-day relative strength index has been above 70 for the past eight days,
reaching 85 today, and all but one day in the last 23, a series unmatched since a 26-day run higher than 70 ended Aug. 28 last year. The RSI identifies possible turning points in indexes or securities by measuring the degree that gains and losses outpace each other in a given time period. A reading above 70 means the gauge is poised to decline.
“When bulls are in control and buyers impose their will as they are in Turkey, traditional tools like RSI must be viewed within the context of the overall technical backdrop, which remains decidedly bullish,” Ross, based in New York, wrote in an e-mailed response to questions from Bloomberg yesterday.
The ISE, up 12 percent in the past month, bears a similar “technical signature” to that of other emerging markets, Ross said. Indonesia’s Jakarta Composite Index has closed at an RSI above 70 for the past 14 days, Mexico’s IPC Index for the past seven and the MSCI Emerging-Market Index, with an RSI of 77.8 today, for the last 18 days.
Turkish stocks have been propelled to record highs on the government’s pledge to cut its deficit and economic growth matching China’s as the fastest among Group of 20 countries in the second quarter. Ross’s analysis sets aside such fundamental factors and is based on technical indicators, including Fibonacci analysis, a system pioneered in the 13th century that assumes asset prices will follow patterns based on proportions found in nature.
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France’s CAC 40 Index gained 1.4 percent to 3,802.81 as of 12:56 p.m. in Paris, headed for the highest close since May. The SBF 120 Index climbed 1.4 percent to 2,837.25 today.
The following shares rose or fell in Paris. Stock symbols are in parentheses.
Alcatel-Lucent SA (ALU FP) rose 2.1 percent to 2.67 euros, the highest price since January. The telecommunications- equipment maker was raised to “buy” from “underperform” at Jefferies & Co Inc.
Atos Origin SA (ATO FP) climbed 2 percent to 34.10 euros, heading for the highest close this month. France’s second- biggest provider of computer services confirmed its full-year outlook after third-quarter sales declined in line with its targets.
Bouygues SA (EN FP) surged 1.6 percent to 32.12 euros, trimming yesterday’s 1.9 percent retreat. The construction company is the favorite to win the contract to build a high- speed rail line between Le Mans and Rennes in the face of competition from Vinci SA and Eiffage SA, French daily La Tribune reported, without citing anyone.
CGG-Veritas (GA FP), the world’s largest seismic surveyor for oil and gas, jumped 6.1 percent to 17.59 euros, the highest since June, after the U.S. lifted a ban on deepwater oil and gas drilling ahead of schedule.
Delachaux (DCH FP) rose 0.9 percent to 58.51 euros, the first advance in four trading sessions. The railway-equipment maker said its third-quarter sales climbed 24 percent to 185.1 million euros. The company said in a statement it maintained a full-year sales forecast of “slightly more” than 700 million euros.
Faurecia SA (EO FP) climbed 4.4 percent to 19.40 euros, a seventh day of gains for the longest winning streak since July. Europe’s largest maker of car interiors was rated “buy” in new coverage at CM-CIC Securities.
GL Events SA (GLO FP) gained 1.7 percent to 24 euros, a seventh day of gains for its longest winning streak since July. The company that manages exhibition venues and supplies events services said third-quarter revenue surged 46 percent to 150.7 million euros. The company said in a statement it is “confident” it can reach full-year sales of more than 690 million euros.
STMicroelectronics NV (STM FP), Europe’s largest chipmaker, rallied 3.3 percent to 5.71 euros. Larger U.S. rival Intel said it will generate $11.4 billion of fourth-quarter sales, plus or minus $400 million, beating an average estimate of $11.3 billion, according to data compiled by Bloomberg. The company cited strong demand from businesses and customers in emerging economies.
Vet’Affaires SA (VET FP) soared 4.3 percent to 27.11 euros, the highest level since January 2008. The French discount clothing retailer said its third-quarter sales jumped to 41.5 million euros.
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German stocks advanced, with the benchmark DAX Index headed for its highest close since September 2008, after the U.S. Federal Reserve signaled policy makers are prepared to buy more government debt.
ThyssenKrupp AG and Salzgitter AG, the country’s largest steelmakers, followed metal prices higher. Infineon Technologies AG advanced 3.8 percent after ASML Holding NV reported earnings that beat estimates. Solar Millennium AG dropped 7.4 percent, the most since September, after cutting its forecast for the year.
The DAX also gained 1.7 percent to 6,409.95 at 2:05 p.m. in Frankfurt, its highest level since Sept. 4, 2008. The measure rallied 4.4 percent in the third quarter as investors speculated that central banks will step in to provide more stimulus for the ailing global recovery. The broader HDAX Index rose 1.7 percent today.
“It seems that comments from the Fed gave the market the last positive signal it needed to break old resistance levels and reach a new year high,” said Christian Falkner, an analyst at Alpha Wertpapierhandels AG in Frankfurt. “We expect the market to continue its ascent in the short term.”
U.S. benchmark indexes climbed to five-month highs yesterday after the Fed published the minutes from its Sept. 21 meeting, showing that the central bank will be ready “before long” to increase purchases of Treasuries, a tactic known as quantitative easing. The Fed also discussed boosting inflation expectations as a way to prop up the economy.
ThyssenKrupp and Salzgitter advanced 2.6 percent to 26.05 euros and 4.1 percent to 53.38 euros, respectively. Copper, lead, nickel, tin and zinc all increased on the London Metal Exchange.
Infineon Jumps
Infineon, Europe’s second-largest chipmaker, soared 3.8 percent to 5.55 euros, its highest price since April. ASML, the region’s biggest semiconductor equipment maker, said third- quarter profit rose to 268.5 million euros ($375.1 million), beating the 247 million-euro average of 21 analysts’ estimates compiled by Bloomberg. The company also reiterated that 2010 sales will reach a record.
Larger U.S. rival Intel Corp. said it will generate $11.4 billion of fourth-quarter sales, plus or minus $400 million, beating an average estimate of $11.3 billion, according to data compiled by Bloomberg. The company cited strong demand from businesses and customers in emerging economies.
Deutsche Bank, Commerzbank
Deutsche Bank AG, Germany’s biggest bank, rose 3 percent to 41.26 euros, the stock’s first advance in five days. Smaller competitor Commerzbank AG added 1.9 percent to 6.51 euros. JPMorgan Chase & Co., the second-biggest U.S. bank by assets, said its third-quarter net income rose 23 percent, higher than analysts estimated, as provisions for soured mortgages and credit-card loans declined.
Solar Millennium sank 7.4 percent to 17.20 euros. The solar company cut its sales forecast for the current fiscal year to 150 million euros from 350 million euros, and its earnings before interest and taxes projection to “neutral or slightly negative.”
Qiagen NV jumped 3.6 percent to 13.19 euros after the Dutch biotechnology company said it entered into an agreement with Abbott Laboratories on molecular tests.
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U.K. stocks rose to the highest level since April after minutes from last month’s Federal Reserve meeting showed U.S. policy makers are prepared to pump more cash into the economy to protect the recovery.
Fresnillo Plc climbed 2.7 percent as the world’s largest primary silver producer said output rose to a record in the third quarter. ARM Holdings Plc rallied 1.9 percent after Intel Corp.’s forecast for fourth-quarter sales topped analysts’ estimates. Standard Chartered Plc lost 2.4 percent after the bank said it plans to raise about 3.3 billion pounds ($5.2 billion) in a rights offer.
The benchmark FTSE 100 Index gained 76.78, or 1.4 percent, to 5,738.37 at 12:58 p.m. in London, on course for the highest close since April 26. The FTSE All-Share Index rose 1.3 percent and Ireland’s ISEQ Index climbed 0.6 percent.
The FTSE 100 has climbed 18 percent since the start of July amid speculation the Fed will next month announce plans to stimulate economic growth as the recovery wanes. The Fed minutes published yesterday showed policy makers “wanted to consider further the most effective framework for calibrating and communicating any additional steps to provide such stimulus.”
“Clearly the U.S. economy with its very high levels of debt needs as much quantitative easing to get it going again,” Andreas Utermann, the chief investment officer at the RCM unit of Allianz Global Investors, which manages about $1.1 trillion, said on Bloomberg Television’s Countdown with Francine Lacqua. “I’m probably slightly more bullish on equities than I was six months ago.”
Fresnillo Gains
Fresnillo rose 2.7 percent to 1,275 pence as output climbed to a record in the third quarter and the company said it expects to “slightly beat” its full-year output forecasts for gold and silver. Rival mining companies Xstrata Plc and Anglo American Plc surged 4.3 percent to 1,298.5 pence and 4.2 percent to 2,850 pence, respectively.
Copper rose to a 27-month high on prospects for increased consumption of the metal from China. Reports today showed China’s foreign-exchange reserves increased by a record to $2.65 trillion at the end of September while a 25 percent jump in exports lifted its trade surplus to $16.9 billion.
ARM, the U.K. designer of chips that power Apple Inc.’s iPhone, gained 1.9 percent to 383 pence. Intel said revenue this period will be $11.4 billion, plus or minus $400 million. That compares with an average projection of $11.3 billion, according to data compiled by Bloomberg.
StanChart Rights Offer
Standard Chartered declined 2.4 percent to 1,862 after saying investors will be offered one new share at 1,280 pence for every eight they already own. Lenders are raising surplus capital as their regulators weigh whether to force the largest banks to hold more capital than the minimum level agreed by international regulators in Basel last month.
Barclays Plc, the U.K.’s third-biggest bank, dropped 1.3 percent to 290.9 pence.
The question now “is quite simply whether the Standard Chartered move is going to be the thin end of the wedge,” said Richard Hunter, the London-based head of U.K. equities at the stockbroker Hargreaves Lansdown Plc. “Barclays is potentially being seen as the next one that might need to make a similar announcement to improve their capital buffer.”
In the U.S., JPMorgan Chase & Co. became the first U.S. bank to report third-quarter results. The lender reported third- quarter profit of $1.01 a share, beating the 88-cent average estimate of analysts surveyed by Bloomberg.
Petrofac, Bodycote
Petrofac Plc gained 4.1 percent to 1,472 pence as Morgan Stanley raised its recommendation for the oilfield-services provider to “overweight” from “equal weight” and the U.S. government lifted its ban on deep-water drilling ahead of schedule.
Bodycote Plc rallied 11 percent to 306.3 pence. The supplier of metal-strengthening services said sales in the remainder of the financial year should be stable and it expects annual operating profit at the upper end of the range of analysts’ forecasts.
Hammerson Plc climbed 2.9 percent to 427.1 pence. Goldman Sachs Group Inc. raised its recommendation for the real estate investment trust to “conviction buy” from “neutral.”
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Brazilian miners, banks, homebuilders and transportation companies will likely eclipse gains for retailers, which have led this year’s advance in Latin America’s largest market, Goldman Sachs Group Inc. said.
Analysts at the New York-based bank added homebuilder PDG Realty SA Empreendimentos & Participacoes, payment processor Cielo SA, and private equity firm GP Investments Ltd. to its focus list of Latin American stocks, according to a note to clients today. Hypermarcas SA,

one of the consumer-goods companies that led gains this year, was removed.
“Commodity stocks we think will especially shine, as developed-market central banks provide a continued flow of liquidity,” wrote strategist Stephen Graham, who is “bearish” on Brazilian steelmakers. “Defensive utilities and telcos may not perform in the strong market we expect.”
Goldman expects the Bovespa stock index to rise 10 percent from Oct. 12’s closing price to 78,000 by yearend.
Consumer goods companies led gains the MSCI Brazil index’s 4.5 percent gain this year, while energy producers were the biggest laggards.
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European stocks advanced after minutes from the Federal Reserve showed policy makers are prepared to buy more government debt and Intel Corp. and JPMorgan Chase & Co. reported earnings that topped estimates.
ASML Holding NV led semiconductor stocks higher, climbing 4.2 percent, as the company posted better-than-estimated profit and Intel, the world’s largest chipmaker, forecast sales that exceeded analysts’ projections. Transocean Ltd. led gains by oil-exploration stocks after the U.S. lifted its ban on deep- water drilling. Standard Chartered Plc limited the advance after announcing a 3.3 billion-pound ($5.2 billion) share sale.
The benchmark Stoxx Europe 600 Index added 1.3 percent to 265.84 at 2:30 p.m. in London, rebounding from yesterday’s 0.3 percent slide. The gauge last week jumped 1.2 percent amid speculation that the Fed will announce plans to stimulate economic growth at its Nov. 2-3 meeting.
“Clearly the U.S. economy with high levels of debt needs as much quantitative easing as is necessary to get the economy growing again,” Andreas Utermann, chief investment officer at RCM unit of Allianz Global Investors, which manages about $1.3 trillion, said in a Bloomberg Television interview. “We anticipate more quantitative easing to come,” he said.
Quantitative Easing
The Fed yesterday published minutes from its Sept. 21 meeting that showed that it will be ready “before long” to increase purchases of Treasuries. The U.S. central bank also discussed boosting inflation expectations as a way to prop up the economy.
National European benchmark indexes advanced in all 18 western markets today, except Luxembourg. The U.K.’s FTSE 100 gained 1.3 percent while Germany’s DAX and France’s CAC 40 both increased 1.7 percent.
ASML rallied 4.2 percent to 23.02 euros after Europe’s biggest semiconductor equipment maker said third-quarter profit rose to 268.5 million euros ($375 million), beating the 247 million-euro average of 21 analysts’ estimates compiled by Bloomberg. The company also reiterated that 2010 sales will reach a record.
STMicroelectronics NV, Europe’s largest chipmaker, rose 3.6 percent to 5.73 euros and Infineon Technologies AG, the region’s second-biggest, climbed 4.8 percent to 5.61 euros.
Larger U.S. rival Intel said it will generate $11.4 billion of fourth-quarter sales, plus or minus $400 million, beating an average estimate of $11.3 billion, according to data compiled by Bloomberg. The company cited strong demand from businesses and customers in emerging economies.
‘Fairly Bullish’
“We’ve been fairly bullish on the tech sector now for some time,” RCM’s Utermann said on Bloomberg Television’s On the Move with Francine Lacqua. “We thought it was going to be one of those sectors that would benefit most from any type of recovery. There is a lot of capital spending going on.”
JPMorgan also reported earnings today. The second-biggest U.S. bank said profit increased 23 percent as provisions for losses on mortgages, credit cards and other consumer loans fell $5.8 billion.
Standard Chartered fell 2.7 percent to 1,857.5 pence after the bank announced plans to sell shares at 1,280 pence for every eight that investors already own. That’s 33 percent less than yesterday’s closing price. Temasek Holdings Pte, which owns a 17.7 percent stake, will subscribe to its portion of the sale.
Drilling Ban Lifted
Transocean jumped 4.4 percent to 63.65 Swiss francs as the U.S. government lifted the ban on deep-water drilling that was introduced following the explosion at BP Plc’s Macondo well off the Louisiana coast which led to the world’s largest accidental oil spill.
Yesterday, Interior Secretary Ken Salazar ended the ban, which was scheduled to expire on Nov. 30, and said that oil companies must meet new safety requirements. Transocean owned the Deepwater Horizon oil rig that was destroyed when the well blew out.
CGGVeritas, the world’s largest seismic surveyor for oil and gas, rallied 7.7 percent to 17.85 euros. Petroleum Geo- Services ASA soared 5.8 percent to 73.5 kroner and TGS Nopec Geophysical Co. surged 12 percent to 99.25 kroner for the biggest gain in the Stoxx 600.
Rockhopper Exploration Plc plunged 17 percent to 383.75 pence after its advisers said resources may be lower than expected. The explorer, which is searching for oil and gas off the Falkland Islands, said it plans to hire a rig to drill more wells after consultants said that resources may be 30 percent less than estimated.
Aixtron, Fresnillo
Aixtron AG, a German maker of equipment used to produce light-emitting diode screens, jumped 8.2 percent to 22.33 euros. General Electric Co.’s lighting division may draw as much as 75 percent of sales from LED products within the next decade, compared with less than 10 percent now, the unit’s chief said.
Fresnillo Plc rose 2.5 percent to 1,272 pence after the world’s largest primary silver producer said its output increased to a record in the third quarter. The company also expects to “slightly beat” its full-year output forecasts for gold and silver.
Shares of Man Group Plc gained 2.9 percent to 264.3 pence after the hedge-fund manager said the weekly net asset value of Man AHL Diversified Futures Ltd. fund was $40.56 at the close of business on Oct. 11. That’s up 4.5 percent compared with the previous week’s close.
Burberry Group Plc dropped 2.6 percent to 1,012 pence after the U.K.’s largest luxury retailer said annual profit will be in the “top half” of analysts’ estimates, disappointing investors who had expected upgrades after second-quarter sales beat forecasts.
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The Bovespa stock index rose for a third day as homebuilders and banks rallied and investors speculated economic growth is accelerating in China, Brazil’s biggest trade partner.
Vale SA, the world’s largest iron-ore producer, climbed after China’s imports of the mineral rebounded to a five-month high. PDG Realty SA Empreendimentos & Participacoes reached a record, leading a rally in homebuilders after Goldman Sachs Group Inc. recommended adding to holdings of the stock. Banco Santander Brasil SA also rose to the highest level since its initial public offering, leading gains in financial stocks.
The Bovespa gained 1 percent to 71,646.42 at 10:38 a.m. New York time. Forty-six stocks rose on the index while 18 fell. The real strengthened 0.8 percent to 1.6570 per dollar.
“Domestic stocks continue to be very strong,” said Eduardo Roche, who helps manage 3 billion reais ($1.81 billion) at Banco Modal SA in Rio de Janeiro. “Valuations are stretched especially in retail, but banks are showing a lot of room to gain. The China iron-ore numbers reinforce the already favorable outlook for Vale. Vale is cheap; it has a lot of upside.”
Brazil’s benchmark equity gauge rose Oct. 11 on speculation the Federal Reserve will take further measures to stimulate U.S. economic growth, overshadowing higher domestic inflation forecasts. The Fed said in minutes published yesterday, when the Brazilian market was closed for a holiday, that it was prepared to ease monetary policy “before long.”
China’s foreign-exchange reserves increased by a record to $2.65 trillion at the end of September, while a 25 percent jump in exports lifted its trade surplus to $16.9 billion, reinforcing optimism the country will continue to lead the global recovery.
China Rebounds
Iron-ore imports by China, the largest buyer of the steelmaking ingredient, rebounded 18 percent in September, indicating government measures to curb steel production haven’t damped ore demand. Imports rose to 52.6 million metric tons, the highest level since April, from 44.6 million tons in August, according to figures provided by China’s General Administration of Customs. That’s 19 percent lower than the 64.6 million tons a year earlier, data compiled by Bloomberg show.
Brazilian miners, banks, homebuilders and transportation companies will likely eclipse gains for retailers, which have led this year’s advance in Latin America’s largest market, Goldman Sachs said.
Vale SA rose 0.5 percent to 47.65 reais. PDG Realty, the Brazilian homebuilder that agreed to buy Agre Empreendimentos Imobiliarios SA, jumped 5 percent to 22.40 reais and earlier reached 22.49 reais, the highest price since its January 2007 IPO. Banco Santander Brasil, the Brazilian unit of Spain’s biggest bank, advanced 2.1 percent to 25.13 reais, the highest level since its IPO in October last year.
Goldman’s Prediction
“Commodity stocks we think will especially shine, as developed-market central banks provide a continued flow of liquidity,” Goldman strategist Stephen Graham, who is “bearish” on Brazilian steelmakers, wrote in a note to clients today. “Defensive utilities and telcos may not perform in the strong market we expect.”
Goldman expects the Bovespa to rise to a record 78,000 by yearend.
Brazilian bank bond sales are climbing to a record, seven months after the central bank freed lenders to start issuing longer-term local debt. Sales of the notes, which are known as letras financeiras and have a minimum maturity of two years, surged to 5.8 billion reais in September, the busiest month since the debut issue in April, according to Cetip SA - Balcao de Ativos e Derivativos, Brazil’s biggest clearinghouse.
The Bovespa index trades at 10.6 times analysts’ 2011 earnings estimates, compared with 11 times for the MSCI Emerging Markets Index of 21 developing nations’ stocks and 14.3 times for Mexico’s IPC index, according to weekly data compiled by Bloomberg. The Bovespa trades at 15.3 times the reported profits of its companies.
To contact the reporter on this story: Alexander Cuadros in Sao Paulo at acuadros@bloomberg.net
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Los Angeles, owner of the largest wastewater collection system in the U.S., is selling $451 million in taxable and tax-exempt bonds to pay for improvements to sewage facilities and refinance existing debt as user fees climb.
The system, which includes Los Angeles and 29 other cities and agencies, serves more than 4 million residents in a 600 square-mile (155,000-hectare) area. Repairs and replacements are part of the 10-Year LA Sewers Construction Program, according to the system’s website.
The city is selling $187 million in taxable Build America Bonds, $80 million in taxable recovery-zone economic development bonds and $184 million in tax-exempt debt. A portion of the proceeds will be used to retire the system’s $300 million in short-term notes as they become due, according to the offering statement.
“We like this kind of deal because this is a classic case of essential services, which gives it added appeal for many investors,” Neil Klein, senior managing director at New York- based Carret Asset Management, said in an interview. “There will be a significant amount of demand. If you are an investor in a higher tax bracket looking for tax-exempts, this fills the need on many levels.”
Recession, Conservation
Recession and conservation efforts have reduced the number of customers and their wastewater usage, according to the offering statement. The number of clients has declined about 0.7 percent to 640,700 this year from 645,111 in 2006. The volume of water processed has fallen about 9 percent to 383 million gallons a day (1.45 billion liters) from 422 million gallons a day during the same period.
“The decline in water usage is something we’re seeing out on the West Coast as a whole,” Klein said. “If utility usage declines more than projections it may allow usage rates to drift higher.”
Los Angeles increased customer fees 7 percent annually from 2005 to 2009, sending the average residential bill to just under $30 a month this year from $24.47 five years ago. The system plans to increase rates an additional 9 percent annually from 2011 to 2014, according to the offering statement.
The city’s Bureau of Sanitation didn’t immediately comment.
High Debt Level
The issue is rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s, both the companies’ third-highest ratings and one level below the AA+ investment grade from Fitch Ratings. In a note, Fitch analysts Doug Scott and Kathy Masterson attributed the system’s rating to its large service area, competitive rates and declining capital expenditures, coupled with a high debt level and the risk that the desired rate increases won’t be granted.
“In 2009, it was envisioned that the city would adopt a multiyear rate package for fiscals 2010-2013,” the Fitch report said. “However, as economic conditions remained weak in the city, staff refrained from recommending rate adjustments to the city council in order to limit pressure on the rate base.”
The wastewater system sold $455 million in tax-exempt revenue bonds in March 2009, with 25-year bonds priced to yield 5.49 percent, or 33 basis points above comparable maturity top- rated debt, according to data from Municipal Market Advisors, an independent research firm based in Concord, Massachusetts.
The securities last traded on Oct. 7 at an average yield of 3.99 percent, one basis point above MMA yields for debt due in 2034. A basis point is 0.01 percentage point.
Yields on top-rated 10-year debt closed at 2.6 percent yesterday, the lowest this month, according to MMA.
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The U.S. increased its crude-oil price forecast for 2011 by $1 a barrel on projections that global economic growth will lead to higher demand and that inventories in industrialized nations will decline.
West Texas Intermediate oil, the U.S. benchmark grade, will average $83 a barrel next year, up from a September forecast of $82, according to the Energy Department’s monthly Short-Term Energy Outlook. The estimate includes an assumption that OPEC will boost its output as prices rise, tempering a bigger gain.
Oil will climb 6.5 percent in 2011 from a projected average of $77.97 this year, the department said. The 2010 figure increased 60 cents from last month and reflects a 26 percent advance from the 2009 average of $61.66 a barrel. Crude has averaged $77.90 a barrel so far this year in New York.
“World oil prices are expected to rise gradually as global economic growth leads to higher global oil demand and growth in non-OPEC supply slows in 2011,” according to the forecast by the Energy Information Administration, the department’s statistical arm.
U.S. gross domestic product will grow 2.6 percent this year and 2.1 percent in 2011, down from projections of 2.8 percent and 2.3 percent a month ago, according to the report.
U.S. households will spend an average of $986 between October and March to heat their homes, an increase of $24, or 2.5 percent, from last winter, EIA projected today in its Winter Fuels Outlook.
Global Demand
The department raised its forecast for global oil consumption this year to 86.06 million barrels a day from 85.95 million last month. That’s up 2.1 percent from last year’s 84.33 million. Demand will climb to 87.44 million in 2011, 80,000 barrels a day higher than last month’s projection.
U.S. oil use will average 18.97 million barrels a day this year, up 200,000 barrels from 2009. This year’s forecast increased 40,000 barrels from the September estimate. Consumption will climb 110,000 barrels to 19.08 million in 2011, according to the report.
The 12 members of the Organization of Petroleum Exporting Countries produced an average 29.49 million barrels a day in the third quarter, up 0.4 percent from the second quarter, the report showed.
Oil ministers from the Organization of Petroleum Exporting Countries signaled that they won’t alter their existing output targets when they meet tomorrow in Vienna.
The oil market is “well balanced,” Saudi Arabian Oil Minister Ali al-Naimi said Oct. 12 when he arrived in Vienna. He called prices between $70 and $80 a barrel “ideal.”
OPEC Output
“EIA expects OPEC production will rise over the forecast period, keeping oil prices from increasing dramatically,” the Energy Department said in the report. “Should OPEC not increase production as global consumption recovers, oil prices could be significantly higher than the central forecast.”
OPEC has raised output by 5 percent from a five-year low reached in March 2009 and now exceeds its own target by 1.9 million barrels a day, about the same amount as Angola produces. Production was 29.1 million barrels a day last month, based on Bloomberg News estimates.
OPEC yesterday raised its forecast for 2010 global oil demand by 100,000 barrels a day to 85.59 million. That compares with 84.46 million last year. It said demand will climb to 86.64 million barrels a day next year.
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U.S. stocks rose, sending benchmark indexes to five-month highs, as better-than-estimated results at CSX Corp. and China’s record currency reserves boosted optimism in the economic recovery.
CSX, the second-largest publicly traded U.S. railroad, rallied 3.9 percent after also saying it’s seeing improvements across almost all markets. Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. advanced amid speculation that Chinese demand for raw materials will improve after the world’s fastest-growing major economy announced $2.65 trillion in currency reserves.
The Standard & Poor’s 500 Index rose 0.6 percent to 1,176.91 at 9:59 a.m. in New York. The Dow Jones Industrial Average increased 71.22 points, or 0.7 percent, to 11,091.62.
“The initial signs from the bellwethers are that this third-quarter earnings season is going to be a positive and help lift the overall stock market,” said Robert Pavlik, chief market strategist at Palm Beach Gardens, Florida-based Banyan Partners LLC, which manages about $1 billion. “The slow growth we’re seeing so far hasn’t done a tremendous negative impact to these firms.”
The S&P 500 rose for a third day yesterday after Federal Reserve policy makers indicated they are ready to pump more cash into the economy to protect the recovery by increasing purchases of Treasury securities, a tactic known as quantitative easing. The gauge has rallied 15 percent from this year’s low on July 2.
Record Streak
Going into this earnings season, more than 70 percent of S&P 500 companies have topped the average analyst earnings estimate for five straight quarters, the longest streak in Bloomberg data going back to 1993.
The prospect of Fed purchases has boosted the prices of Treasury notes and bonds, driving two-year yields to record lows and 10-year yields to the lowest since January 2009. While discouraging investment in government debt, as benchmarks the low yields limit borrowing costs low for companies and consumers.
The number of mortgage applications in the U.S. climbed for the first time in six weeks as record-low interest rates led to a surge in refinancing. The Mortgage Bankers Association’s index increased 15 percent in the week ended Oct. 8, the Washington- based group said today.
Euphoria
“Quantitative easing euphoria, coupled with the lack of bad surprises from quarterly results, and some switch from bonds toward equities in view of year-end portfolio rebalancing is driving the market,” said Ricciardo Ricciardelli, managing director at Unifortune Investment Management SGR SpA in London.
CSX gained 3.9 percent to $59.51 after third-quarter profit topped analyst estimates. Earnings from continuing operations climbed to $414 million, or $1.08 a share, exceeding the $10.4 average estimate of 24 analysts surveyed by Bloomberg.
Eighteen companies in the S&P 500 are scheduled to release third-quarter results this week. Analysts surveyed by Bloomberg predict 23 percent profit growth from a year earlier for companies in the index, the fourth straight quarterly increase after a record nine-quarter slump.
Alcoa, the biggest U.S. aluminum producer, advanced 0.8 percent to $13.30. Freeport-McMoRan, the world’s largest publicly traded copper producer, gained 1.5 percent to $96.86.
Copper rose to a 27-month high in London, climbing for a second day on prospects for increased consumption of the metal.
China’s foreign-exchange reserves increased by a record to $2.65 trillion at the end of September while a 25 percent jump in exports lifted its trade surplus to $16.9 billion, reinforcing optimism the country will continue to lead the global recovery.
Japan, Australia
Japanese machinery orders unexpectedly jumped 10.1 percent in August, the most since December, and Australian consumer confidence rebounded in October as the central bank extended a pause on interest-rate increases and employment surged.
Exxon Mobil Corp., the largest U.S. oil company, gained 0.3 percent to $64.89. Crude climbed for the first time in three days in New York after the International Energy Agency raised its global demand forecast and China reported crude imports reached a record.
Clearwire Corp. jumped 9.8 percent to $7.41. The high-speed wireless carrier is seeking to raise $2.5 billion to $5 billion in a wireless spectrum auction that has attracted telephone and cable companies, said people with direct knowledge of the sale.
MGM Resorts International dropped 8.7 percent to $12.43. The biggest casino operator on the Las Vegas Strip plans to raise more than $500 million by selling stock, and said its founder and biggest shareholder will reduce his stake.
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The Obama administration will grant a request from ethanol producers to permit higher concentrations of the corn-based fuel additive in gasoline for vehicles made in 2007 and later, a person familiar with the decision said. Ethanol makers rose in New York trading.
The Environmental Protection Agency will announce later today its decision allowing refiners to blend as much as 15 percent ethanol into fuel, up from the current 10 percent, said the person, who spoke on condition of anonymity before the announcement.

Archer Daniels Midland Co. is among producers that have pressed the EPA to raise the limit for an industry in which at least a dozen companies have sought bankruptcy protection since 2008. Opponents, including oil companies and automakers and environmental groups, say adding more ethanol may damage car engines, boost food prices and worsen air quality.
Archer Daniels of Decatur, Illinois, rose 45 cents, or 1.4 percent, to $33.16 at 9:53 a.m. in New York Stock Exchange composite trading. The company is the second-largest U.S. ethanol producer behind closely held Poet LLC, based in Sioux Falls, South Dakota.
“The approval of E-15 by the EPA won’t have a positive effect on ADM in the near-term,” Robert Moskow, an analyst for Credit Suisse AG in New York who has an “outperform” rating on the shares, said in a report Oct. 6. “Blenders remain reluctant to implement E-15 because it requires a separate pump and because the EPA has not absolved the blenders of potential legal liability from consumers.”

Green Plains, Aventine
Green Plains Renewable Energy Inc., based in Omaha, Nebraska, rose 26 cents, or 2.3 percent, to $11.55 on the Nasdaq Stock Market. Aventine Renewable Energy Holdings Inc. rose 50 cents, or 1.9 percent, to $27.50 in the over-the-counter market.
The EPA delayed its decision in December, saying it needed more time to conduct tests on the blend. A decision was again postponed in June, prompting Growth Energy, the ethanol-industry trade group seeking the 15 percent blend, to write to President Barack Obama expressing frustration with the process.
The plan to allow increased ethanol levels was reported late yesterday by the Wall Street Journal.
Raising the “blend ratio” will increase demand. By law, the U.S. must use 12 billion gallons of renewable fuels such as ethanol next year, up from 10.5 billion in 2009, and use 15 billion gallons by 2015.
GM, Ford, Chrysler
General Motors Co., Ford Motor Co. and Chrysler LLC have said the government should be cautious about increasing the ethanol percentage in gasoline. AAA, the nation’s biggest motoring organization, said in July 2009 the EPA should reject the Growth Energy request because higher blends may damage exhaust systems, engines and fuel pumps and destroy catalytic converters.
Valero Energy Corp., the largest U.S. refiner, and Marathon Oil Co., the largest refiner in the Midwest, are concerned selling gasoline with more of the corn-based fuel additive may leave them liable for engine damage, according to company spokesmen.
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The pound is undervalued against the dollar and euro, and will probably appreciate over the next year after “near-term pain” from government spending cuts, according to State Street Global Advisors Inc.
The pound is about 15 percent below the level it should be against the dollar and 20 percent against the euro, said Collin Crownover, the Boston-based head of currency management at State Street, which oversees $83 billion in assets. The British currency may strengthen to $1.70 and to 80 pence per euro in 12 months from $1.58 and 88 pence now, he said.
“We are not saying there’s a fantastic story in the pound, but at least its fundamentals are looking better than the dollar and the euro,” Crownover said in an interview, citing the company’s value model. “The U.K. will be rewarded for its austerity measures, although there might be some short-term pain from fiscal consolidation.”

The pound lost 7.1 percent against the euro since the end of June and declined 6 percent against the dollar on speculation that Prime Minister David Cameron’s efforts to reduce the country’s record budget deficit will hurt growth. Conservative finance minister George Osborne will unveil details of the spending cuts on Oct. 20.
“Our view is that the austerity measures will have a milder impact on the U.K. economy than the market thinks,” said Crownover.
“Given the anemic growth in the euro zone outside Germany, it’s hard to justify the euro’s current strength. And its debt problem hasn’t gone away. If anything I would argue it’s getting slightly worse.”
The pound was little changed against the euro at 88.09 pence per euro as of 2:38 p.m. in London. It traded at $1.5828 from $1.5809 yesterday.
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Gold futures rose to a record $1,368.90 an ounce amid mounting investor demand for the metal as an alternative to currencies. Silver extended a rally to the highest level since 1980.
Goldman Sachs Group Inc., UniCredit SpA and Citigroup Inc. have raised price forecasts as the metal approached another record high. The dollar was down against a basket of six major currencies on speculation the Federal Reserve will ease monetary policy further to spur economic growth.
“Gold has become the world’s third reservable currency as all currencies seem intent upon racing each other downward,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. He advised clients to buy the metal.
Gold futures for December delivery climbed $20.80, or 1.5 percent, to $1,367.50 at 10:12 a.m. on the Comex in New York. The previous all-time high was $1,366 on Oct. 7.
Goldman Sachs forecast a price of $1,650 in 12 months. UniCredit analyst Jochen Hitzfeld in Munich raised his 2011 target to $1,500. Citigroup’s “short and medium term” forecast is $1,450.
“This momentum higher will attract investors to participate in the next move up,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland.
A Fed purchase of $500 billion of government securities would lead to lower interest rates, weighing on the dollar and aiding gold, Dincer said.
Treasury Purchases
The central bank in March finished $1.7 trillion in purchases of Treasuries, mortgage-backed securities and housing agency bonds. The Fed has kept its benchmark lending rate at zero percent to 0.25 percent since December 2008.

Gold, which pays no interest, becomes a more attractive investment when borrowing costs decline. Before today, the metal rose 23 percent this year.
“Both gold and the dollar agree that Ben Bernanke will be victorious in his quest to foment a robust rate of inflation,” said Michael Pento, a senior economist at Euro Pacific Capital in New York.
Gold for immediate delivery reached a record $1,367.95.
Silver futures for December delivery rose 50.8 cents, or 2.2 percent, to $23.655 an ounce. Earlier, the price reached $23.71, the highest level since September 1980.
Platinum futures for January delivery gained $23.30, or 1.4 percent, to $1,706.60 an ounce on the New York Mercantile Exchange.
Palladium futures for December delivery climbed $11.35, or 2 percent, to $592 an ounce.
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