Commodity surge lifts Wall Street and world equities; dollar falls
Stocks on major world markets posted their biggest weekly advance since 2011 on Friday, as greater investor appetite for riskier assets propelled gains in equities and a surge in commodities and crude oil prices.
Declines in the dollar, a bullish oil forecast as well as miner Glencore’s pledge Friday to slash world zinc output have lifted beaten-down commodities. Brent and US crude oil gained about 9 per cent for the week, the biggest weekly percentage increase in six weeks.
The US dollar hit three-week lows against the euro and Swiss Franc as minutes from the Federal Reserve’s September policy meeting showed the Fed in no rush to raise interest rates.
The MSCI all-country world equity index climbed 0.7 per cent for its eighth daily gain. It was up 4.4 per cent for the week, its biggest weekly advance since December 2011.
The 19-commodity Thomson Reuters/Core Commodity CRB Index , a global benchmark for commodities, was up 4.4 per cent on the week, its best gain since 2012.
“After a harsh sell-off in commodities, followed up by the recent weakness for global equities over global growth concerns, we are now having a risk-on trade,” said Chris Jarvis, commodities analyst at Caprock Risk Management in Frederick, Maryland, referring to investors’ appetite for assets considered riskier such as stocks and commodities.
Zinc jumped about 10 per cent in its biggest daily percentage gain in at least 35 years, after the Glencore news. Glencore shares gained 35.9 per cent on the week, their biggest weekly rise since being floated in mid-2011, and doubling from a record low reached only two weeks ago.
US stocks ended slightly higher, though the Standard & Poor’s 500 index put in its best weekly gain of the year. Concerns over the outlook for third-quarter earnings weighed on sentiment Friday. Aluminum company Alcoa’s shares were down 6.8 per cent at US$10.26 following disappointing results.
The Dow Jones industrial average rose 33.74 points, or 0.2 per cent, to 17,084.49, the S&P 500 gained 1.46 points, or 0.07 per cent, to 2,014.89 and the Nasdaq Composite added 19.68 points, or 0.41 per cent, to 4,830.47.
“We’ve had a good start to the fourth quarter,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, but “you had disappointing results from Alcoa and further reason to take money off the table.”
For the week, the S&P 500 rose 3.3 per cent, its biggest weekly percentage advance since December, while the S&P energy index climbed 7.8 per cent, also its biggest weekly gain since December.
The FTSEuroFirst index of the leading 300 European shares closed up 0.4 per cent.
In the foreign exchange market, the euro hit a three-week high against the greenback of $1.13875, and marked its highest percentage gain against the dollar in four weeks, at 1.3 per cent. The dollar hit a three-week low against the Swiss franc of 0.95870 franc, while the dollar index also hit a three-week low of 94.692.
The Fed minutes revealed the extent to which policymakers are concerned that a global economic slowdown might threaten the US economic outlook. Though they said overseas turmoil had not “materially altered” economic prospects, they opted to hold interest rates steady last month.
Brent crude gained 9.1 per cent for the week while US crude jumped 8.8 per cent, their biggest weekly percentage gains since late August.
For the day, US crude closed up 20 cents at $49.63, the highest settle since late July, while Brent crude ended 40 cents down at $52.65 on Friday.
Oil got a boost overnight after forecaster PIRA Energy Group predicted crude prices would rise to $70 per barrel by the end of 2016.
Three-month zinc futures were up 10.1 per cent on the London Metal Exchange at $1,836 a tonne after Glencore said it will cut production by 500,000 tonnes, a third of its output and equivalent to 4 per cent of the world’s production.
Zinc had fallen about 30 per cent since May to a five-year low, so the rebound could mark the bottom of the market and the commodities complex in general, some analysts said.
In the US bond market, benchmark 10-year Treasuries traded up 5/32 in price to yield 2.089 per cent. The 10-year yield had briefly risen to 2.138 per cent, its highest level in about two weeks.