Commodities Climb to Two-Year High as Stocks Advance on Takeover Optimism
Commodities rose to a two-year high following industry takeovers and evidence economic growth is being sustained, and stocks gained for a fifth straight day. Six-month bill rates declined to a record low as the Treasury reduces sales of short-term securities, and European default risk fell to a three-year low.
The Standard & Poor’s GSCI index of 24 raw materials added 0.9 percent at 5 p.m. in New York. The MSCI All-Country World Index of shares in 45 nations climbed 0.4 percent, while the Standard & Poor’s 500 Index gained less than 0.1 percent. Rates on six-month bills fell as much as three basis points to 0.1099 percent. Contracts on the Markit iTraxx Crossover Index of 40 European companies with mostly high-yield credit ratings fell five basis points to 368.
Minmetals Resources Ltd. (1208) made an unsolicited offer of about $6.5 billion for Perth-based Equinox Minerals Ltd. (EQN) to gain control of Africa’s largest copper mine. Solvay SA (SOLB) agreed to buy Rhodia SA (RHA) for about $4.8 billion to add specialty chemicals. Raw-materials producers led global equities higher, climbing 0.7 percent for the biggest gain among 10 industries tracked by Bloomberg. Stocks gained for a second day after the U.S. unemployment rate unexpectedly fell to a two-year low.
“It’s a perfect recipe for M&A,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., which manages $358.2 billion. “The global economy continues to heal. Commodity prices are rising. In addition, you still got a ton of cash out there and stock prices are relatively inexpensive. It’s not at all surprising that those trends are converging.”
The S&P/GSCI index has risen 17 percent this year while the MSCI gauge of worldwide stocks has advanced 4.9 percent. There have been 6,239 deals announced globally this year, totaling $642.6 billion, a 27 percent increase from the $506.5 billion in the same period in 2010, according to data compiled by Bloomberg. After the close of U.S. stock exchanges, Texas Instruments Inc. (TXN) said it will purchase National Semiconductor Corp. (NSM) for about $6.5 billion.
Lead rose to the highest price in almost three years in London on speculation rebuilding in Japan after last month’s earthquake and revived car sales will spur demand. Lead for three-month delivery rose to $2,775.25 a ton, the highest intraday price since April 2008.
Corn prices climbed to the highest since July 2008 after a government report showed shrinking U.S. inventories, while storms in the Midwest threatened to delay spring planting. Futures for May delivery rose 24.25 cents, or 3.3 percent, to $7.6025 a bushel after touching $7.65, the highest for a most- active contract since July 7, 2008. Prices have more than doubled in the past year as global supplies plunged.
Wheat rose to an almost four-week high as persistent dryness threatened crops in the southern U.S. Great Plains, while wet weather raised concern that spring planting will be delayed in northern areas. Wheat futures for May delivery reached $7.92, the highest intraday price since March 8.
Stock indexes for Hong Kong, Norway, India, China, Argentina and Turkey gained more than 0.7 percent. The S&P 500, the benchmark measure of U.S. shares, swung between a loss of 0.1 percent and a gain of 0.3 percent. Hewlett-Packard Co. and Intel Corp. (INTC) fell the most in the Dow Jones Industrial Average, losing more than 1.1 percent, as the Semiconductor Industry Association said three-month average sales dropped 1.1 percent in February.
Obama, Congress Wrangle
Treasury six-month bill rates declined to a record low as the U.S. reduces sales of short-term securities while President Barack Obama’s administration and Congress wrangle over budget cuts and raising the U.S. debt limit.
The U.S. will reach its legal debt limit no later than May 16 unless Congress acts before then, and emergency measures may provide extra borrowing room to last only until about July 8, Treasury Secretary Timothy F. Geithner said today. Since February, the Treasury has cut by $195 billion the amount of outstanding Supplementary Financing Program bills, or SFPs, it sells on behalf of the Federal Reserve in a program set up in 2008 amid efforts to prop up the financial system.
“It’s created a log-jam at the front end of the yield curve,” said Ward McCarthy, chief financial economist at Jefferies & Co. Inc. in New York, one of the 20 primary dealers that trade with the Fed. “It exacerbated what was already a bit of a collateral squeeze at the front end.”
Treasuries rose as Fed Bank of Atlanta President Dennis Lockhart said the U.S. economic recovery faces headwinds, reducing speculation the central bank will cut its $600 billion debt-buying program.
Yields on benchmark 10-year Treasury notes fell two basis points, or 0.02 percentage point, to 3.42 percent, according to Bloomberg Bond Trader prices. Two-year note yields dropped four basis points to 0.76 percent.
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