Asian Stocks, Dollar Climb as China Refrains From Rate Increase
Dec. 13 (Bloomberg) -- Asian stocks advanced, copper and rubber jumped to records, and the dollar strengthened for a sixth day after China refrained from raising interest rates and as optimism increased that the U.S. recovery is gathering steam.
The MSCI Asia Pacific Index climbed 0.5 percent to 133.70 as of 4 p.m. in Tokyo. Futures on the Euro Stoxx 50 index rose 0.5 percent while those on the Standard & Poor's 500 Index were little changed. Copper rallied as much as 1.7 percent in London and rubber gained for a fourth day in Tokyo. The Dollar Index, which tracks the currency against six major peers, added 0.2 percent, and was set for its longest stretch of gains since June.
China on Dec. 10 ordered banks to set aside larger reserves and didn't announce an interest-rate increase, even as data released the following day showed the inflation rate reached 5.1 percent in November while industrial-output growth and retail sales grew. As Federal Reserve policy makers meet tomorrow, a U.S. Commerce Department report will likely show retail sales climbed for a fifth straight month, adding to data that showed consumer confidence increased in December to a six-month high.
"A rate increase would produce a greater impact on the wider economy, so their cautious measure is positive for the market" said Lam Chee Mun, a fund manager at TA Investment Management in Kuala Lumpur.
Two stocks rose for each that fell on the MSCI Asian index, which has climbed 11 percent this year. The Shanghai Composite jumped 2.9 percent, its biggest advance since Oct. 15. Gains today helped trim the index's 2010 loss to 11 percent, still the steepest drop among Asian markets this year. China Vanke Co., the nation's largest developer by value, rose 3.7 percent.
'More Effective'
Consumer prices rose a more-than-forecast 5.1 percent from a year earlier, a statistics bureau report showed in Beijing over the weekend. Producer-price inflation was 6.1 percent, higher than any of 28 economists surveyed by Bloomberg News had estimated. The central bank boosted reserve requirements by 50 basis points starting Dec. 20, the third increase in five weeks, instead of raising borrowing costs.
"The government seems to be using reserve requirements at the moment as a more effective tool," Hugh Simon, co-manager of the Dreyfus Greater China Fund, said in a Bloomberg Television interview. "They need to have some relief about inflation. Inflation this time, rather than 2008, is coming from the demand side as people are getting paid more."
Westpac Banking Corp. paced a rally in Australia's four largest lenders after analysts including Jarrod Martin of Credit Suisse Group said the companies may emerge as victors from Treasurer Wayne Swan's package to promote banking competition. Westpac, Commonwealth Bank of Australia, National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. rose at least 1.1 percent each after Swan's 13-point plan stopped short of investors' most pessimistic expectations.
Copper, Rubber
Copper for three-month delivery on the London Metal Exchange rose to as high as $9,138.50 a metric ton, surpassing the $9,091 level reached on Dec. 9. Zinc gained 2.4 percent while nickel rose 0.9 percent. Rubber futures in Tokyo advanced to an all-time high of 396.4 yen per kilogram following rains in Thailand, the largest exporter.
Crude oil gained 0.5 percent in New York to $88.24 a barrel on speculation oil demand will continue to rise in China, the world's largest energy user.
The dollar rose against most of its 16 major counterparts and traded at 84.13 yen from 83.95 yen in New York. Retail sales climbed 0.6 percent in November after advancing 1.2 percent in October, according to the median estimate of economists in a Bloomberg News survey before tomorrow's figures. Confidence among U.S. consumers increased in December to a six-month high, the Thomson Reuters/University of Michigan preliminary index of consumer sentiment showed on Dec. 10.
Yields Climb
Treasuries fell before the release of the data, sending yields on the 10-year note higher by three basis points to 3.35 percent. Fed policy makers may signal this week they will contemplate boosting purchases of government debt to support job growth. Chairman Ben S. Bernanke said earlier this month purchases of government securities may be increased beyond the $600 billion already announced under the Fed's so-called quantitative easing program.
The euro retreated against 14 of its 16 major peers before a Dec. 16 and 17 European Union meeting, where leaders will discuss the creation of a permanent mechanism to shore up over- indebted countries. Against the dollar, the shared currency traded $1.3200 from $1.3226 in New York on Dec. 10
Euro's Survival
The currency's survival is "non-negotiable," requiring budget vigilance and closer economic cooperation to overcome "structural weaknesses" within the euro region, German Chancellor Angela Merkel and French President Nicolas Sarkozy said Dec. 10. Splits between EU governments on how to contain the debt crisis have emerged, with Germany opposed to euro-area bonds that Italy, Belgium and Luxembourg favor.
"Europe's large nations may find it hard to provide further aid when they think about their own domestic factors," said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan's second-largest bank. "The euro is struggling to rise, as the dollar is regaining strength."
To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net David Yong in Kuala Lumpur at dyong@bloomberg.net .
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net
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