Stocks, Commodities Rise on China as Pimco Stance Hurts Bonds

By David Merritt
Jan. 4 (Bloomberg) -- Stocks and commodities rose while Treasuries fell on the first trading day of 2010 as China’s manufacturing expanded at the fastest pace in more than five years and the outlook for American job losses improved. Oil gained after freezing weather hit the U.S.
The MSCI World Index of 23 developed nations’ stocks advanced 0.6 percent at 10:06 a.m. in London and futures on the Standard & Poor’s 500 Index gained 0.7 percent. The MSCI Emerging Markets Index added 0.6 percent to a 17-month high. The 10-year Treasury note yield climbed to 3.87 percent, near the highest level since June. Natural gas for February delivery gained as much as 4.5 percent and crude oil rose for an eighth day, exceeding $80 a barrel.
Manufacturing in China, which led the recovery from the first global recession since World War II, expanded by the most in five years last month, an industry report showed. The U.S.
will report Jan. 8 that payrolls fell in December by the smallest amount since the recession began two years ago, according to the median forecast in a Bloomberg News survey.
"We expect 2010 to mark a further period of economic recovery, albeit in most instances with the growth upturn remaining moderate rather than very strong," Richard Urwin, London-based head of asset allocation and economics at BlackRock Inc., which manages about $1.4 trillion, wrote in a note.

European Stocks

Europe’s Dow Jones Stoxx 600 Index gained 0.8 percent, as all 19 industry groups rose. The measure rallied 28 percent last year, its biggest annual gain since 1999. BHP Billiton Ltd., the world’s largest mining company, added 1.4 percent in London.
Air Berlin Plc advanced 4 percent in Frankfurt. Europe’s third-biggest discount carrier was upgraded to "buy" from "hold" at Deutsche Bank AG. Renault SA, France’s second- largest carmaker, added 3.4 percent in Paris. Sales volumes will be "very strong" in the first half of 2010, Bernard Cambier, sales director for France, said in an interview on BFM radio.
The MSCI Asia Pacific Index climbed 1 percent, extending its 34 percent gain last year, the best annual advance since 2003. Japan Airlines Corp. soared 31 percent after the government said the Development Bank of Japan will double the amount of credit for the carrier.
The advance in U.S. futures indicated that the S&P 500 may rise after a 1 percent decline on Dec. 31. A report due at 10 a.m. New York time may show U.S. manufacturing expanded at a faster pace in December. The Institute for Supply Management’s factory index rose to 54 from 53.6 in November, according to the median forecast of 57 economists surveyed by Bloomberg News.
Readings greater than 50 signal expansion.

U.S. Jobs

Payrolls probably fell by 1,000 workers last month, the fewest since the recession began in December 2007, according to a Bloomberg News survey ahead of the Labor Department report on Jan 8.
Bonds fell around the world, with the yield on the 10-year U.S. Treasury climbing 4 basis points to 3.87 percent. The rate on Australia’s 10-year note jumped 11 basis points to 5.75 percent, while Germany’s 10-year bund yield gained 2 basis points to 3.40 percent.
Pacific Investment Management Co., which runs the world’s biggest bond fund, is paring holdings of U.S. and U.K. debt as government borrowing expands, and is "more cautious" on corporate debt, according to the 2010 outlook of Paul McCulley, a money manager and member of the investment committee. "We’re making a very active decision to run light on risk," he wrote.

Gas Rises

U.S. natural gas for February delivery rose as much as 25 cents to $5.821 per million British thermal units on the New York Mercantile Exchange. Cold, windy weather enveloping the U.S. from the northern Plains to the East Coast may continue to break records today, forecasters said. Spot U.K. gas prices surged and U.S. crude oil for February delivery rose as much as
2 percent, or $1.59, to $80.95 a barrel in Nymex trading.
Orange-juice futures fell 8.2 percent in the final two days of 2009 on speculation that freezing weather won’t damage crops in Florida, the world’s second-largest orange grower. Gold for immediate delivery added 1.3 percent to $1,111.32 an ounce in London. Copper for delivery in three months rose 1.1 percent to
$7,458 a metric ton on the London Metal Exchange, leading advances in industrial metals.
The MSCI emerging markets index extended last year’s record
75 percent rally as Credit Suisse analysts Sakthi Siva and Kin Nang Chik said in a report the index may rise more than 20 percent this year. Sri Lanka’s Colombo All-Share Index rose 2.9 percent after central bank Governor Nivard Cabraal said the economy is likely to expand more than forecast. The extra yield investors demand to own emerging-market bonds instead of U.S.
Treasuries dropped 3 basis points to 2.71 percentage points, the lowest since June 2008, according to JPMorgan’s EMBI+ Index.
The dollar fell against 15 of the 16 most-traded currencies tracked by Bloomberg, led by a 1.2 percent decline against the Canadian dollar and 1.4 percent versus the Mexican peso.
Asian currencies advanced on speculation overseas investors will pour more funds into regional assets as the global economy recovers. The Korean won rose 1.1 percent against the dollar, its strongest level in almost four weeks, as exports climbed at the fastest pace in more than a year in December.