Gold at fresh record, equities buoyant

LONDON -- Gold hit a fresh record high on Thursday as the dollar struggled, while emerging market stocks climbed to their highest level this year.

European shares opened more than 1% higher ahead of interest rate decisions from the Bank of England and European Central Bank.

Neither was expected to change rates.

Market sentiment was also given a boost after aluminum giant Alcoa posted a surprise profit on Wednesday after three consecutive quarterly losses.

The company is the first major report in the U.S. third-quarter earnings season.

Spot gold topped US$1,058 per ounce to mark a record high for the third session in a row. It has primarily been driven higher by the weakening dollar, which makes the dollar-denominated metal more attractive to investors.

In some currencies -- the high-flying Australian dollar, for example -- gold has actually fallen in price this year.

"Investors are turning toward gold as a hedge in dollar weakness," said Adrian Koh, an analyst at Phillip Futures in Singapore.

The dollar was down 0.7% against a basket of major currencies, close to its year lows.

The currency has been hit by a combination of expectations that U.S. interest rates will stay low for some time and a belief that the global economy is on the mend, easing the motivation behind last year's flight to dollar safety.

The euro was up 0.6% at US$1.4773 and the dollar lost a third of a% to 88.32 yen.

The Australian dollar gained 1.4%, still benefiting from this week's rate hike. It has now gained nearly 28% against the U.S. dollar this year.

STOCKS BUOYANT

World stocks were putting in another positive performance, with MSCI's all-country world index up 0.8% on the day. Its emerging market counterpart was up the same amount at a new high for the year.

The two indexes have gained around 27% and 65%, respectively, this year.

The pan-European FTSEurofirst 300 was up 1.1%, boosted in part by commodity related stocks and bullish sentiment over the Alcoa earnings.

"Alcoa had better than anticipated results, which is good. It is now all about anticipating quarter-three earnings. There is a general sense that quarter-three earnings are going to be more positive than expectations," said Bernard McAlinden, market strategist at NCB Stockbrokers.

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U.S. Markets Wrap: Stocks, Dollar, Oil Rise as Treasuries Fall
By Rita Nazareth and Mark Shenk

Oct. 9 (Bloomberg) -- U.S. stocks rose, sending the Dow Jones Industrial Average to a one-year high, as analyst recommendations spurred gains in technology and health-care shares. The dollar and oil rose, while gold and Treasuries fell.

International Business Machines Corp. led gains in the Dow after Barclays Plc upgraded computer hardware companies, saying server and storage demand is picking up. Google Inc. climbed as Credit Suisse Group AG lifted its price estimate and said the search business will benefit from a rebound in advertising. WellPoint Inc. and Humana Inc. rallied at least 3.6 percent after analysts said shares of health insurers are cheap.

“We’re going even higher,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, which manages $214 billion. “We’ve got a replacement cycle for technology. Earnings comparisons with last year will be damn good. There are new funds coming into the market. We’ll trade above 1,200 on the S&P 500 by year-end.”

The Standard & Poor’s 500 Index added 0.6 percent to 1,071.49 at 4:06 p.m. in New York. The Dow climbed 78.07 points, or 0.8 percent, to 9,864.94, its highest close since Oct. 6, 2008. The Nasdaq Composite Index increased 0.7 percent to 2,139.28.

The S&P 500 rallied 4.5 percent this week, its steepest advance since July, as U.S. service industries grew after 11 months of contraction, jobless claims fell more than forecast and Alcoa Inc. kicked off the third-quarter earnings season with an unexpected profit.

Dollar Climbs

The dollar gained the most against the yen since August on speculation the Bank of Japan will trail other central banks in increasing interest rates as the recession comes to an end.

The six-currency Dollar Index recovered from a 14-month low after Federal Reserve Chairman Ben S. Bernanke said yesterday policy makers are ready to raise borrowing costs once the economy improves. Canada’s dollar was the biggest gainer versus the U.S. currency among major counterparts as employers added more jobs in September than economists forecast.

The U.S. currency climbed as much as 1.7 percent to 89.89 yen, the biggest advance since Aug. 7, before trading at 89.82 at 4:04 p.m. in New York, compared with 88.39 yesterday. The dollar strengthened 0.6 percent to $1.4712 per euro, from $1.4794, paring a decline for the week to 0.9 percent. The euro increased 1.1 percent to 132.14 yen, from 130.76.

Treasuries Decline

Treasuries fell, with two-year notes recording their first weekly loss since September, as Federal Reserve Chairman Ben S. Bernanke said the bank is ready to tighten monetary policy once the economic outlook improves.

Thirty-year bonds declined the most in four months after yesterday’s $12 billion auction of 30-year bonds, the last of four offerings this week totaling $78 billion, drew weaker-than- average demand. The yield on the 30-year bond closed below 4 percent last week for the first time since April as reports showed manufacturing declined and inflation remains subdued.

The yield on the two-year note rose eight basis points, or 0.08 percentage point, to 0.97 percent at 4:19 p.m. in New York, according BGCantor Market Data. The 1 percent security maturing in September 2011 fell 5/32, or $1.56 per $1,000 face amount, to 100 2/32. Yields have climbed 10 basis points since Oct. 2, the first weekly increase since Sept. 18.

Yields on 30-year bonds rose 14 basis points to 4.22 percent. The yield increased as much as 16 basis points, the most since it gained 18 basis points on June 10. For the week the yield has increased 23 basis points, the most since it rose 31 basis points the week ended Aug. 7.

Oil Rally

Crude oil climbed to the highest close in three weeks after the International Energy Agency increased its global consumption forecast for a third month.

Oil demand is likely to average 86.1 million barrels a day next year, 350,000 barrels a day more than the IEA estimated in September, a monthly report showed. Prices fell earlier as the dollar rose after Federal Reserve Chairman Ben S. Bernanke said monetary policy will be tightened once the economy improves.

Crude oil for November delivery gained 8 cents to $71.77 a barrel at 2:45 p.m. on the New York Mercantile Exchange, the highest settlement since Sept. 18. Prices climbed 2.6 percent this week. Futures rose as much as 55 cents and dropped as $1.07 during today’s session.

Natural gas futures fell almost 4 percent, the biggest drop in a week, on speculation supplies will be adequate to meet winter heating demand in the U.S.

U.S. gas stockpiles rose 69 billion cubic feet to 3.658 trillion cubic feet in the week ended Oct. 2, the highest total on record, the Energy Department said yesterday.

Natural gas for November delivery fell 19.3 cents, or 3.9 percent, to settle at $4.77 per million British thermal units at 2:46 p.m. on the New York Mercantile Exchange, the biggest drop since Oct. 1. Gas is down 15 percent this year, lagging behind heating oil, a competing fuel, which is up 32 percent.

Gold Decline

Gold prices dropped, paring the biggest weekly advance since April, as a stronger dollar cut demand and some investors sold the metal to lock in gains from its climb to a record. Gold futures, up 4.4 percent this week, capped the biggest such gain since April 24, while the dollar is down 0.7 percent.

Gold futures for December delivery slipped $7.70, or 0.7 percent, to $1,048.60 an ounce on the New York Mercantile Exchange’s Comex division. Yesterday, the metal climbed to an all-time high of $1,062.70, setting a record for a third straight day.

Orange Juice

Orange-juice prices soared the most in three years after the Department of Agriculture said Florida’s crop will decline 16 percent, more than analysts forecast.

Output will be 136 million boxes of oranges in the harvest that is just starting, down from a revised 162.4 million in the previous season, the USDA said today in its first estimate for the crop. Six analysts in a Bloomberg News survey projected an average 151.2 million. A cold spell and drought earlier this year reduced the amount of fruit on trees, the government said.

Orange juice for November delivery surged by the exchange limit of 10 cents, or 10 percent, to $1.0865 a pound on ICE U.S. Futures in New York, the highest level for a most-active contract since Aug. 14. The percentage gain was the biggest since Oct. 12, 2006. The commodity jumped 17 percent this week and is up 60 percent in 2009.