Stocks Rally on Bernanke as Metals Soar Amid Dollar Slump

Bloomberg: Stocks and bonds rose around the world, metals gained and the dollar retreated after Federal Reserve Chairman Ben S. Bernanke said the biggest economy will continue to need stimulus. Portuguese equities and government debt fell amid political turmoil.

The MSCI All-Country World Index increased 1 percent to 367.16 at 7:44 a.m. New York time. Standard & Poor’s 500 Index futures rose and emerging-market stocks headed for their biggest advance in almost 10 months. Treasuries led bonds higher and gold rallied 1.8 percent in the longest winning streak since April. Bloomberg’s Dollar Index sank 1.2 percent. Corporate credit risk fell in Europe to the lowest in more than a month. Portugal’s PSI 20 Index (PSI20) slid 1.6 percent.

Bernanke said yesterday that “highly accommodative monetary policy for the foreseeable future is what’s needed” and minutes of the Fed’s June meeting showed officials would want to see more signs of job growth before starting to scale back their $85 billion-a-month bond purchases. The Bank of Japan said at the end of its two-day meeting today it would retain its plan for monetary stimulus. Portuguese President Anibal Cavaco Silva said early elections now are undesirable.

“There is indeed some relief in the market,” said Michiel de Bruin, who oversees about $30 billion as head of euro-denominated government bonds at F&C Group in Amsterdam. “It was more of a balanced story rather than a very hawkish one” from Bernanke, he said.

European Stocks

More than three stocks climbed for every one that dropped on the Stoxx Europe 600 Index, which advanced 0.7 percent. A gauge of mining companies rallied 3.7 percent, its biggest gain in more than six months. BHP Billiton Ltd. and Rio Tinto Group, the world’s two largest commodity producers, rose 4.6 percent and 4.9 percent, respectively.

Associated British Foods Plc jumped 3.9 percent after reporting that sales grew 20 percent at its Primark clothing business in the 16 weeks to June 22.

Portugal’s Banco Comercial Portugues SA and Banco BPI SAlost more than 4 percent in Lisbon. Portugal’s president used a televised speech last night to call for the end of the country’s bailout program in June 2014 to coincide with the start of the process leading to new elections. Yields on the nation’s 10-year bonds rose 10 basis points to 6.87 percent.

Chinese Stocks

The MSCI Emerging Markets Index added 2.5 percent, the most since Sept. 14 on a closing basis. China’s stocks advanced the most since Dec. 14 as lenders rallied on speculation the government will take measures to bolster economic growth.

Ping An Bank Co. (000001) and China Minsheng Banking Corp. (600016) jumped 10 percent, helping the Shanghai Composite Index (SHCOMP) rise 3.2 percent.

S&P 500 futures rose 1 percent, signaling the gauge may extend its five-day advance that took it to within 1 percent of its record yesterday. The U.S. stock benchmark has recovered losses following a 4.8 percent drop from June 19 to June 24 and is up 16 percent in 2013.

Benchmark 10-year Treasury yields declined six basis points to 2.57 percent, after climbing to 2.75 percent earlier this week, the highest since August 2011. German 10-year bond yields fell five basis points to 1.61 percent.

Italy’s 10-year bonds fell, pushing the yield three basis points higher to 4.48 percent, after the nation sold 6.4 billion euros ($8.36 billion) of debt.

Fed Minutes

Global equities have lost about $3 trillion in value and 10-year Treasury yields have surged more than 50 basis points since May 22, when Bernanke indicated the central bank may reduce its bond-buying program as economic risks subside.

Minutes of the Fed’s June meeting, which took place before a jobs report that beat estimates, showed about half of the 19 participants in the Federal Open Market Committee wanted to halt the central bank’s bond-buying program by year end.

The minutes also showed many wanted to see more signs that employment is improving before backing a reduction in the pace of asset purchases. Data last week showed U.S. employers added 195,000 jobs last month, beating the increase of 165,000 predicted by economists.

The cost of insuring against losses on corporate bonds dropped, with the Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies falling 4.4 basis points to 104.9, the lowest since June 7.

In the Asia-Pacific region, the Markit iTraxx Asia Index of 40 investment-grade borrowers outsideJapan declined 11.9 basis points to 149.4, the lowest since June 27.

Dollar Weakens

The indexes typically fall as investor confidence improves and rise as it deteriorates. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The dollar weakened against all but one of its 16 major peers as the Bloomberg Dollar Indexsank to its lowest level since June 25. The euro gained for a second day, climbing 0.7 percent to $1.3069.

The yen strengthened 0.4 percent to 99.28 per dollar. South Korea’s won led gains in Asian emerging-market currencies, climbing 1.2 percent to 1,122.39 per dollar, the strongest level since June 10. The Bank of Korea held its benchmark seven-day repurchase rate unchanged at 2.5 percent for a second straight month today.

Rupee Trading

The Indian rupee was little changed at 59.68 per dollar. The central bank may impose further curbs on rupee trading by lowering lenders’ net open position limits, according to a person with knowledge of the matter, who asked not to be identified because the information is confidential. They were referring to the amount of foreign-exchange contracts that investors can hold without opposing trade covers.

Silver jumped 2.4 percent and copper gained 2.8 percent. West Texas Intermediate oil fell 0.5 percent to $105.94 a barrel after rising to a 15-month high of $107.45 a barrel.

The S&P GSCI (SPGSCI) gauge of 24 commodities was little changed, snapping a run of seven straight gains.

reporters on this story: Paul Dobson in London