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Stocks, Commodities Rally on Fed Bond-Buying Plan

Stocks rallied around the world, commodities surged and the dollar slid as the Federal Reserve’s plan to buy mortgage securities fueled demand for riskier assets. Oil rose to a four-month high and Treasuries sank.

The Standard & Poor’s 500 Index (SPX) gained 0.4 percent to 1,465.77 at 4 p.m. in New York, its highest level since December 2007. The MSCI Emerging Markets Index jumped 3.3 percent in its biggest gain since June. The S&P GSCI gauge of 24 commodities rose for a seventh day, climbing to its highest level in five months, as nickel surged more than 6 percent to lead gains. The Dollar Index dropped as much as 0.8 percent and touched the weakest level since February.

The Fed said yesterday it will expand holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month and hold the federal funds rate near zero until at least the middle of 2015. U.S. equities also advanced after a gauge of consumer confidence topped forecasts. The MSCI All- Country World Index rose to the highest level since July 2011.

“Very aggressive accommodative policies have very strong impacts on equity markets,” Andrew Slimmon, Chicago-based managing director of global investment solutions at Morgan Stanley Smith Barney, said in a telephone interview. His firm has $1.7 trillion in client assets. “There are a lot of investors with too much cash on the sidelines that are capitulating and moving into the market.”

Fed’s Tools

Fed Chairman Ben S. Bernanke is enlarging his supply of unconventional tools to attack U.S. unemployment stuck above 8 percent since February 2009, a situation he called a “grave concern.” Unlike the two previous rounds of quantitative easing, the program announced yesterday has no end date.

Freeport-McMoRan Copper & Gold Inc., Alcoa Inc. and Marathon Oil Corp. rose more than 2 percent to pace a rally in raw-material and energy shares, which led gains among the 10 main groups in the S&P 500. Staples Inc. jumped 2.1 percent amid a report that private-equity firms are considering buying the largest U.S. office-supplies chain. Analogic Corp. surged 16 percent after profit topped estimates.

Apple Inc. rose 1.2 percent to a record $691.28, helping lead the Nasdaq Composite Index to an almost 12-year high. Apple said orders for the iPhone 5 from its online store won’t ship for two weeks, fueling speculation the new model has sold out.

Government reports today showed retail sales increased 0.9 percent in August, the most in six months, and the consumer- price index increased 0.6 percent. The rise in the cost of living was the biggest in more than three years and reflected a surge in fuel prices.

Consumer Confidence

The Thomson Reuters/University of Michigan gauge of consumer confidence climbed to 79.2 in September from 74.3 in August, topping the median economist forecast for a reading of 74.

The 10-year Treasury note yield climbed as much as 17 basis points to a four-month high of 1.89 percent, the rate on similar-maturity German bunds increased 16 basis points to 1.67 percent and 10-year U.K. gilt yields added 15 basis points to 1.96 percent.

The difference between yields on U.S. government 10-year notes and same-maturity Treasury Inflation Protected Securities, an indicator of trader expectations for consumer prices over the life of the debt, widened to as much as 2.64 percentage points, the most since April 2011.

Miners Rally

The Stoxx Europe 600 Index jumped 1.3 percent to its highest level in 15 months. A gauge of mining companies rallied 6.1 percent, the most this year. Rio Tinto Group, the world’s third-largest commodity producer, surged 6.6 percent, while BHP Billiton Ltd. (BHP), the biggest, added 6 percent. Antofagasta Plc (ANTO), the copper company controlled by Chile’s Luksic family, soared 7.8 percent and Anglo American Plc advanced 9.2 percent.

Chemring Group Plc (CHG) rallied 5.7 percent as the U.K.’s Takeover Panel granted Carlyle Group LP (CG) an extra month to consider making a bid for the maker of munitions. In a statement today, Chemring said that the panel has a new “put up or shut up” deadline of Oct. 12. Lonmin Plc (LMI) jumped 5 percent as the platinum producer resumed talks with workers in an attempt to end a five-week strike at its Marikana mine in South Africa.

The yield on 10-year Italian bonds rose one basis points to 5.02 percent, after earlier dipping below 5 percent for the first time since March 26.

Dollar Weakens

The dollar depreciated as much as 1.3 percent to $1.3169 per euro, the weakest level since May 4. The South Korean won appreciated almost 1 percent to 1,117.30 per dollar, after S&P upgraded the nation’s debt. Singapore’s dollar reached S$1.2203 against its U.S. equivalent today, the strongest level since September 2011. The pound climbed 0.5 percent to $1.6229, the highest since April 30.

The yen retreated from a seven-month high against the dollar after Finance Minister Jun Azumi signaled he’s ready to intervene to weaken the currency.

Oil pared gains after ring above $100 for the first time since May 4 amid concern that unrest in the Middle East and North Africa will disrupt supplies. West Texas Intermediate crude for October delivery climbed as much as 2.2 percent to $100.42 a barrel in electronic trading on the New York Mercantile Exchange and settled today’s session up 0.7 percent at $99.

Gold Climbs

Spot gold rose 0.2 percent to $1,769.93 an ounce in London trading, and earlier today touched $1,778, its highest price since Feb. 29. Zinc, copper, lead, nickel and aluminum jumped more than 3.8 percent to lead gains in 20 of 24 commodities tracked by the S&P GSCI.

Platinum rose for an 11th day for its longest streak of gains in more than a quarter of a century. Workers protested about their pay at mines owned by the three companies that account for more than half of global output of the metal.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell for a fourth day, declining 12 basis points to 173, the lowest since the current series of the gauge started trading in March. The index has retreated for 10 straight weeks, its longest-ever streak.

The MSCI Emerging Markets Index increased 3.3 percent, the most since June. The Hang Seng China Enterprises Index of mainland companies jumped 3.7 percent and India’s Sensex climbed 2.5 percent. Russia’s Micex Index (INDEXCF) rose 4.1 percent, extending its rally from this year’s low in May to more than 20 percent, the threshold for a bull market.

To contact the reporters on this story: Will Hadfield in London at whadfield@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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