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Stocks, Metals Rise on Dubai Debt Talks, Manufacturing Orders

Dec. 2 (Bloomberg) — Stocks gained from London to Hong Kong as concern about Dubai’s debt eased and metals prices rose after U.S. manufacturing expanded for a fourth straight month.

The MSCI Asia Pacific Index rose 0.5 percent to a six-week high of 120.07 at 2:20 p.m. in Tokyo as record gold prices boosted Zijin Mining Group Co. The Standard & Poor’s 500 Index added 1.2 percent to 1,108.86 yesterday. Europe’s Dow Jones Stoxx 600 Index jumped 2.7 percent, the most since July. Gold for immediate delivery gained 1.1 percent to $1,209.32 an ounce after rising as high as $1,210.59.

Copper and aluminum climbed yesterday as a U.S. manufacturing report showed demand for goods would continue to expand. The Institute for Supply Management’s new orders index increased to 60.3 from 58.5, and a measure of export demand climbed to a 15-month high. Stocks surged after European finance ministers said risks from Dubai were limited as the emirate started talks to restructure $26 billion of debt.

“Encouraging economic data and an ongoing commitment from governments to support economies have served to buoy investor confidence,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne. “Investor appetite for risk has increased, and that has also generated a renewed demand for commodities.”

Zijin, which yesterday agreed to buy a stake in Indophil Resources NL, climbed 4.6 percent to HK$9.05 in Hong Kong. Gold advanced to a record for a second straight day as investors sought to protect their wealth against a slumping dollar.

Copper Rises

Rio Tinto Ltd., the third-biggest mining company, advanced 2.7 percent to A$73.32. BHP Billiton Ltd., the largest mining company, gained 1.2 percent to A$41.85. Copper in London yesterday reached $7,089 a metric ton, the highest since September 2008. The metal was little changed at $7,070 today.

“The market is running to commodities in anticipation that these will gain from demand for hedging against inflation and that the global economic recovery is under way,” said Jonathan Ravelas, market strategist at Manila-based Banco de OroUnibank Inc., which manages $8 billion.

The dollar and yen weakened against major counterparts amid higher demand for riskier assets. The dollar weakened to as much as $1.5096 to the euro in Tokyo from $1.5081 in New York yesterday. It declined to $1.5144 on Nov. 25, the lowest level since Aug. 8, 2008. The yen fell to as weak as 131.27 per euro from 130.74, and to 87.06 per dollar from 86.68.

Dubai Debt

The Nov. 25 announcement that Dubai World was seeking to delay payments on some of its $59 billion of liabilities prompted investors to sell emerging-market assets and stocks, as the price of insuring against a default by Dubai surged.

Dubai is in talks with its lenders to restructure $26 billion of debt, easing concern that a default would add to the $1.7 trillion that financial companies around the world have written down because of the credit crisis.

The MSCI World Index climbed 2 percent yesterday as Luxembourg Finance Minister Jean-Claude Juncker said banks in the euro zone have “really limited” exposure to Dubai’s debt problems. The MSCI Asia Pacific Index has gained 5.4 percent the past three days after a 3.1 percent slump on Nov. 27 amid optimism the region will be mostly sheltered from Dubai losses.

“Dubai to me is a blip,” Arnout van Rijn, chief investment officer of Robeco Hong Kong Ltd., told Bloomberg Television. “It looks like there is an over exaggeration.”

The cost to protect against a default by Dubai dropped 110 basis points to 460 yesterday, the biggest one-day decline since Feb. 23, according to credit-default swap prices from CMA Datavision.

Saudi billionaire Prince Alwaleed bin Talal said confusion over whether the Dubai government would back Dubai World’s debt “was not helpful at all” and damaged investor confidence in the region.

Oil Shields Mideast

“However, you have to understand that other countries such as Saudi Arabia, Qatar and neighboring Abu Dhabi are countries to be reckoned with,” Alwaleed said in a Bloomberg Television interview. “With the price of oil where it is now, I don’t think their economies will be shaken at all.”

Crude oil for January delivery gained $1.09 to $78.37 a barrel in New York yesterday, the highest settlement since Nov. 18. Prices are up 76 percent this year.

The cost of protecting Australian and Japanese corporate bonds from default decreased, according to traders of credit- default swaps. The Markit iTraxx Australia index declined 2 basis points to 89.5 basis points as of 11:51 a.m. in Sydney, according to Citigroup Inc. The Markit iTraxx Japan index fell 3 basis points to 135 basis points as of 9:52 a.m. in Tokyo, according to Morgan Stanley prices.

Won Climbs

South Korea’s won rose 0.6 percent to 1,154 per dollar, near a 14-month high, after the central bank said foreign- exchange reserves climbed to $271 billion last month from $264 billion at the end of October, reflecting inflows of foreign investment.

“There’s a healthy balance-of-payments surplus, and Korea has been intervening to buy dollars against its currency which is another reason reserves have been picking up,” said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Calyon. “The main theme is receding concerns about Dubai and the contagion spreading to global markets.”

Australia’s currency advanced for a third day against the yen as gold, the nation’s third most-valuable raw material export, rose and a gauge of metals prices gained to the strongest level since September 2008 yesterday.

The so-called Aussie gained as much 0.4 percent to 80.53 yen from 80.18 yen in New York yesterday. The currency rose as much as 0.3 percent to 92.76 U.S. cents from 92.50 cents.