Dow average reaches 16,000 after China rally while gold retreats

BOTH THE DOW JONES INDUSTRIAL AVERAGE and the Standard & Poor's 500 Index breached record levels Monday morning, breaking through 16,000 and 1,800, respectively, as many investors fully considered what effect the economic reforms proposed by China will do for future growth. / BLOOMBERG NEWS FILE PHOTO/SCOTT EELLS
BOTH THE DOW JONES INDUSTRIAL AVERAGE and the Standard & Poor's 500 Index breached record levels Monday morning, breaking through 16,000 and 1,800, respectively, as many investors fully considered what effect the economic reforms proposed by China will do for future growth. / BLOOMBERG NEWS FILE PHOTO/SCOTT EELLS

NEW YORK – Stocks rose, with the Dow Jones Industrial Average reaching 16,000 for the first time, as China’s pledge to expand economic freedoms spurred speculation the country is headed toward more sustainable growth. European shares extended the longest rally in 15 months, while gold fell.
The Dow climbed 62.61 points to 16,024.31 at 9:33 a.m. in New York and the Standard & Poor’s 500 Index topped 1,800 for the first time. The Hang Seng China Enterprises Index climbed 5.7 percent in Hong Kong, the most in almost two years. Brazil’s real and India’s rupee appreciated more than 1 percent against the dollar, which dropped against all but one of its 16 major counterparts. U.S. interest-rate swaps slid to the least in a year relative to Treasury note yields. Gold dropped 0.6 percent and oil slipped.
China’s leaders vowed to allow more private investment in state-controlled industries and expand farmers’ land rights as part of the ruling Communist Party’s biggest package of economic reforms since the 1990s.
“The initial reaction to the Chinese communication was a negative one, but as we’re getting more detail, it looks like this is a revolutionary change,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages $131 billion, told Bloomberg Television. “We’re starting to get optimism coming through the market. The turnaround in sentiment and the improving macro data should push the equity market higher into 2014.”

China outlook

The MSCI Emerging Markets Index rose 1.9 percent, the most in two months. The Shanghai Composite Index climbed 2.9 percent. India’s Sensex advanced 2.2 percent, and benchmark gauges in Brazil, Indonesia, Turkey, Poland and the Czech Republic advanced at least 1 percent.
China’s plan will guide the country toward a market-based economy, “significantly” raise its growth potential and help reduce macro risks, Jun Ma, chief economist at Deutsche Bank AG in Hong Kong, wrote in a report today. “We expect a 20-25 percent upside to the MSCI China” index in the next 12 months, Jun wrote.
China’s interest-rate swaps touched a five-month high. The country will accelerate convertibility of the yuan along with the freeing-up of interest rates, according to the party statement Nov. 15.
“We believe China is on the cusp of a massive multiyear bull run,” Christie Ju, managing director at Jefferies Group LLC in Hong Kong, wrote in a note to clients.

Trading volumes in the Stoxx 600 were 21 percent less than the 30-day average, according to data compiled by Bloomberg. The gauge capped a six-week advance on Nov. 15, the longest rally in 15 months, and has climbed 16 percent this year.

- Advertisement -

Aberdeen jumps

Aberdeen Asset Management PLC jumped 14 percent after Lloyds Banking Group PLC agreed to sell its Scottish Widows Investment Partnership division to Scotland’s largest money manager. Sonova Holding AG advanced 6.3 percent as the world’s largest hearing-aid maker raised its full-year forecast after first-half revenue beat analyst estimates.
Petrofac Ltd. slumped 16 percent, the most in almost five years, after the U.K. oil engineer in the Middle East predicted “flat to modest” profit growth in 2014. Korian fell 2.6 percent after agreeing to buy Medica SA for 1.1 billion euros ($1.5 billion) in a merger that will create the largest French operator of nursing homes.
UniCredit S.p.A. and Societe Generale SA are selling bonds in euros after the cost for banks to borrow in the currency dropped by the most in six months. Italy’s biggest lender is marketing 500 million euros of securities due May 2019 while SocGen is issuing floating-rate notes.

Kiwi gains

The dollar weakened 0.2 percent versus the yen and dropped 0.2 percent to $1.3518 per euro.
Brazil’s real jumped 1.5 percent per dollar, the rupee strengthened 1 percent and South Korea’s won advanced 0.7 percent.
The difference between the five-year Treasury rate and similar-maturity swaps narrowed to as little as nine basis points, the least since November 2012. The spread shrinks as investors seek to receive a fixed interest rate on contracts backed by a bank instead of less risky Treasuries.
The yield on the U.S. 10-year note was little changed at 2.70 percent. German bunds were also little changed, with yields at 1.70 percent.
Gold for immediate delivery declined 0.6 percent to $1,282.47 an ounce, the first drop in four days. West Texas Intermediate was little changed at $93.84 a barrel. Saudi Arabia exported more oil in September than in any month since November 2005, according to data from the Joint Organisations Data Initiative. Corn dropped 0.9 percent after the U.S. proposed a cut in the amount of ethanol that must be blended into gasoline, curbing demand for the crop in biofuels.

No posts to display