Commodity Rally Drives Mining Stocks Higher as Dollar Drops

By Stephen Voss

Nov. 18 (Bloomberg) -- Commodities rose as the recovering world economy spurred demand for raw materials, sending gold to a record and mining stocks higher. Oil advanced for a third day as the dollar fell.
Crude oil climbed to $79.92 a barrel at 10:07 a.m. in London as gold for immediate delivery reached a record for the second day this week, touching $1,147.72 an ounce. Copper jumped 2.3 percent to a 14-month high as the Dollar Index declined. Europe’s Dow Jones Stoxx 600 Basic Resource Index gained 1.3 percent, led by shares of BHP Billiton Ltd., the world’s biggest mining company, and Rio Tinto Group.
“For commodities as a whole, now there is no fear that there will be an economic calamity,” Amrita Sen, a commodities analyst at Barclays Capital, said in London. “Investor sentiment remains extremely robust. We will continue to see that continue through the fourth quarter.
Signs the global economy is recovering from its worst recession since World War II stoked demand for fuel amid output reductions by the Organization of Petroleum Exporting Countries, while China’s expansion sucked in imports of copper, aluminum and iron ore. The MSCI Emerging Markets Index has doubled from its low point on March 2.
Industrial metals rallied on the London Metal Exchange, with copper for three-month delivery rising to $6,985 a metric ton, the highest price since Sept. 25, 2008. Nickel jumped 3 percent on speculation Chinese demand for stainless steel will counter lower consumption in the U.S.
Platinum Demand
Platinum for immediate delivery gained as much as 0.4 percent to $1,463.10 an ounce, the highest level since Aug. 29, 2008. Demand for platinum jewelry has risen to a six-year high on record consumption in China, Johnson Matthey Plc said yesterday.
President Barack Obama was scheduled to meet today with Premier Wen Jiabao at the end of his first trip to China. In talks yesterday with President Hu Jintao, Obama said China played a key role in helping to end the global recession and urged Hu to make good on a commitment to allow the yuan to appreciate.
Oil rallied after the American Petroleum Institute said yesterday that crude inventories fell by 4.37 million barrels last week to 333.1 million. The U.S. Energy Department will release its own weekly inventory report at 10:30 a.m. in Washington.
UBS AG raised its forecast for oil because of a weaker dollar and improved demand from developing nations, particularly China, the world’s second-largest energy consuming-nation.
Yen Declines
The dollar and the yen fell against the euro as stocks rose. The U.S. currency weakened 0.4 percent to $1.4942 per euro and the yen dropped 0.3 percent to 133.14. The pound slid 0.5 percent to 88.95 pence per euro after minutes from the Bank of England’s Nov. 5 meeting showed policy makers split three ways in a vote to extend the bond-purchase program to 200 billion pounds ($336 billion) and discussed lowering the deposit rate.
The MSCI World Index added 0.3 percent. Europe’s Dow Jones Stoxx 600 Index gained 0.3 percent amid speculation Cadbury Plc may receive a joint bid from Hershey Co. and Ferrero SpA. Cadbury advanced 1.1 percent to 797 pence.
U.S. stock-index futures were little changed before reports due at 8:30 a.m. in Washington that may show builders in October broke ground on houses at the fastest pace in 11 months, while consumer prices held below the Federal Reserve’s long-range goal.
Micex Rallies
The Micex Index of stocks in Russia, the world’s biggest energy-exporting economy, jumped 1.1 percent to a four-week high. Qatar’s DSM 20 Index increased 1.5 percent, leading gains in global benchmarks, after the government yesterday sold $7 billion of international bonds in the biggest emerging-market debt sale this year.
Treasuries were little changed, with the yield on the 10- year note at 3.34 percent. The U.S. will probably sell $44 billion of two-year notes on Nov. 23, a record $42 billion of five-year debt on Nov. 24, and $32 billion of seven-year securities on Nov. 25, also the most ever, according to Wrightson ICAP LLC, a Jersey City-based research firm that specializes in government finance. The two-year note auction would match the record amount sold last month.
To contact the reporter on this story: Stephen Voss in London at sev@bloomberg.net