[dicemets]

When I stop at the traffic lights and look at the car beside me sliding forward, I shake my head at the driver, only to realise that I have forgotten to depress my own car brakes and it is my car that is sliding backwards.

But the Americans are failing to realise that stock, oil and gold are rising NOT because of economic recovery but because of the fall in the global price of American assets.


U.S. Markets Wrap: Stocks, Oil, Gold Rise, as Dollar Declines
By Rita Nazareth and Margot Habiby

Oct. 6 (Bloomberg) -- U.S. stocks rose, extending a worldwide rally, on speculation third-quarter earnings will top estimates and growing conviction the global economy is improving. The dollar slid after Australia unexpectedly raised interest rates, boosting oil and sending gold to a record.

Alcoa Inc. and Newmont Mining Corp. climbed at least 3.5 percent, while Exxon Mobil Corp. gained 1.6 percent as crude oil traded near $71 a barrel. Corning Inc., the world’s biggest maker of glass for liquid-crystal display panels, added 4.7 percent on an upgrade at UBS AG. The MSCI World Index of 23 developed countries added 1.9 percent, the most in two months.

“The stock market wants to go up,” said Keith Wirtz, chief investment officer at Fifth Third Asset Management Inc., which oversees $20 billion in Cincinnati. “Investors are braced for better-than-expected third-quarter earnings. And the rate hike in Australia suggests that global growth is back to positive territory.”

The Standard & Poor’s 500 Index increased 1.4 percent to 1,054.72 at 4:07 p.m. in New York. The Dow Jones Industrial Average gained 131.5 points, or 1.4 percent, to 9,731.25. The 30-stock gauge has climbed 2.6 percent so far this week, its steepest two-day advance in almost three months. Five stocks rose for each that fell on the New York Stock Exchange.

U.S. equities also advanced as President Barack Obama, responding to widening job losses, considered a mix of spending programs and tax cuts that would amount to an additional economic stimulus without carrying that label.

Commodities Increase

Gains in commodities came as the dollar slid to its weakest level in almost two weeks versus the euro and fell against most other major currencies as the Australian rate hike boosted demand for higher-yielding assets.

The Reserve Bank of Australia’s decision to lift the overnight cash rate target to 3.25 percent from a 49-year low of 3 percent followed the first expansion this year in U.S. service industries. Manufacturing in emerging markets increased the most in the past three months since the second quarter of 2008, according to the HSBC Emerging Markets Index of data from purchasing managers.

Gold touched a record $1,045 an ounce in New York on speculation that currencies will depreciate, spurring inflation and boosting the appeal of the precious metal for investors seeking to preserve their wealth. Gold futures previously hit a record $1,033.90 in March 2008.

Gold, Oil

The spot price is heading for a ninth straight annual gain, the longest rally since at least 1948. The dollar fell as much as 0.7 percent against a basket of six major currencies.

Obama has increased the U.S. marketable debt to an unprecedented $6.94 trillion as he borrows to spur the world’s largest economy. Goldman Sachs Group Inc. predicts the country will sell about $2.9 trillion of debt in the two years ending next September.

Gold futures for December delivery climbed $21.90, or 2.2 percent, to $1,039.70 on the Comex division of the New York Mercantile Exchange. Gold for immediate delivery gained as much as 2.6 percent to a record $1,043.78. The metal has climbed 18 percent this year.

The dollar slid versus the euro after the Australian interest rate increase spurred demand for higher-yielding assets. It declined 0.5 percent to $1.4717 per euro at 4:01 p.m. in New York, from $1.4648 yesterday. It reached $1.4762, the weakest level since Sept. 24. The dollar fell 0.8 percent to 88.79 yen, from 89.53.

Dollar Slides

Also pressuring the greenback was a report that Persian Gulf states and Japan, Russia and China discussed dropping the U.S. currency for oil trades. The report in the U.K.’s Independent newspaper cited unidentified sources.

Saudi Arabia’s Central Bank Governor Muhammad al-Jasser and Kuwaiti Oil Minister Sheikh Ahmed Al-Abdullah Al-Sabah denied any talks were held.

Crude oil for November delivery rose 47 cents, or 0.7 percent, to $70.88 a barrel at 2:41 p.m. on the New York Mercantile Exchange, the highest settlement since Sept. 22. Prices have gained 59 percent this year.

Natural gas futures fell for the first day in three after the government raised its forecast for winter stockpiles of the heating fuel.

Natural Gas Gains

Gas inventories will probably reach 3.85 trillion cubic feet by the end of this month, up from a forecast 3.84 trillion in September, according to a report today from the Energy Department’s Energy Information Administration. Supplies have already risen to a record as the worst recession since the 1930s cut demand from industrial consumers.

Natural gas for November delivery declined 10.7 cents, or 2.2 percent, to settle at $4.880 per million British thermal units at the 2:48 p.m. close on the Nymex. The contract traded between $4.801 and $5.12 today. Gas has almost doubled since settling at $2.508 per million Btu on Sept. 3, the lowest price in more than seven years.

Gas stockpiles in the U.S. rose to a record 3.589 trillion cubic feet in the week ended Sept. 25.

Treasuries fell, led by longer-maturity debt, after the government sold a record $39 billion of three-year notes, the second of four note and bond auctions this week totaling $78 billion.

The auction drew a yield of 1.445 percent, more than the 1.441 percent forecast in a Bloomberg News survey of 10 of the Federal Reserve’s 18 primary dealers that underwrite the sales. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.76 compared with an average of 2.57 percent at the last 10 auctions.

The yield on the benchmark three-year note rose three basis points to 1.38 percent at 3:49 p.m. in New York, according to BGCantor Market Data. The 10-year note yield rose four basis points to 3.26 percent, while the yield on the 30-year bond climbed six basis points to 4.08 percent.

Today’s sale was the largest three-year note offering since the Treasury began regular auctions of the securities in 1981, according to data from the department’s Bureau of the Public Debt.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Margot Habiby in Dallas at mhabiby@bloomberg.net.

Last Updated: October 6, 2009 17:08 EDT