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Stocks Advance, Commodities Rally on Fed’s Pledge


European stocks gained for a second day and commodities rallied after the Federal Reserve said it will keep interest rates at a record low for two more years, while index futures fell following yesterday’s surge in American shares. The Swiss franc weakened.

The Stoxx Europe 600 Index rose 0.9 percent at 7:15 a.m. in New York. Standard & Poor’s 500 Index futures slipped 0.7 percent after the gauge’s biggest jump in more than two years yesterday. The franc depreciated 0.4 percent versus the euro. The 10-year Italian yield decreased five basis points to 5.12 percent. Oil advanced 4 percent and gold climbed 1.2 percent.

Fed Chairman Ben S. Bernanke vowed yesterday to keep borrowing costs at an all-time low to revive a recovery that’s “considerably slower” than expected. Switzerland’s central bank said today it will “significantly” increase the supply of liquidity to banks, and people familiar with the transactions said the European Central Bank bought Italian and Spanish bonds.

“Stocks became oversold on the back of global growth worries” Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has $100 billion under management, said in a Bloomberg Television interview. “We’re due for a bounce and Bernanke has provided that.”

Four stocks gained for every one that fell in the Stoxx 600. Standard Life Plc, Scotland’s biggest insurer, surged 13 percent after posting profit that beat analysts’ estimates on higher fees and increased revenue in Canada. Kloeckner & Co. SE plunged 21 percent after the German steel trader reported earnings that missed projections.

News Corp., Cisco

S&P 500 futures gained as much as 0.6 percent and fell as much as 1.3 percent. The benchmark gauge for U.S. equities rallied 4.7 percent yesterday. Six companies in the index are due to release results today, including News Corp. and Cisco Systems Inc.

The yield difference between two- and 10-year Treasuries was within two basis points of the narrowest since October, underscoring concern about the pace of the economic recovery. The government sells $24 billion of 10-year securities today after yesterday’s auction of three-year securities drew the lowest yield since records began in May 1981 in the first note sale since Standard & Poor’s cut the U.S. debt rating on Aug. 5.

The Spanish 10-year yield fell five basis points to 5.04 percent. Italy sold 6.5 billion euros ($9.4 billion) of 366-day bills, with the average yield at 2.959 percent, compared with a yield of 3.67 percent at the previous sale on July 12.

The cost to insure French government debt against default rose three basis points to a record 164 basis points, according to CMA.

Expanding Deposits

 

The Swiss franc declined after reaching a record 1.00749 per euro yesterday following the Fed decision. The Swiss National Bank said in a today it boosted the supply of liquidity to banks by expanding sight deposits to 120 billion francs ($165 billion) from 80 billion francs. It will also conduct foreign-exchange swap transactions, a tool last used in 2008. The central bank said it’s ready to take further measures if needed.

The S&P GSCI index of 24 commodities rose 2.8 percent, the first gain this week. Oil climbed to $82.49 a barrel after crude inventories fell the most since June, according to the American Petroleum Institute.

Gold jumped to $1,760.68 an ounce, the fourth consecutive gain. Commodities may outperform equities the rest of the year because of record demand and shortages, according to Barclays Capital.

The MSCI Emerging Markets Index rallied 2.3 percent, set for the biggest gain since April 20. Taiwan’s Taiex Index advanced 3.3 percent, while the Czech PX Index jumped 3.4 percent. South Africa’s rand led gains in developing-nation currencies, strengthening 3.8 percent against the dollar from yesterday’s close in London.

Source: Stephen Kirkland (Bloomberg)