While you were sleeping: Upbeat Bernanke, retail sales gain lift stocks, oil, copper

Wednesday 16th September 2009

Stocks rose on Wall Street and in Europe, oil and metals advanced and the yen weakened after Federal Reserve chairman Ben Bernanke said America’s recession is probably over and US retail sales jumped.

“Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time," Bernanke told a Brookings Institution conference in Washington.

"The general view of most forecasters is that that pace of growth in 2010 will be moderate, less than you might expect given the depth of the recession, because of ongoing headwinds," Bernanke said. Among factors holding back the recovery, unemployment “will be slow to come down.”

US retail sales jumped by 2.7% last month, more than expected, for the biggest gain in three years. The government’s cash-for-clunkers trade-in deal for cars, aimed at getting consumers into more fuel-efficient models, helped fuel the gains. Still, excluding autos, sales rose 1.1%, beating forecasts. Spending rose in 11 of 13 categories measured.

Helping lift sentiment, billionaire Warren Buffett told a conference in California that Berkshire Hathaway Inc. is buying shares and he’s putting “a lot for my money” in the stock market. Also, a report from the New York Fed showed manufacturing in that region grew at the fastest pace in about two years.

The Dow Jones Industrial Average gained 0.6% to 9683.41 and the Standard & Poor’s 500 rose 0.3% to 1052.63. The Nasdaq Composite advanced 0.5% to 2102.64.

Alcoa Inc., the aluminium producer, jumped 8.1% to US$13.99, leading the Dow higher. Heavy earthmoving equipment maker Caterpillar rose 6% to US$51.70 and General Electric gained 4.2% to US$16.

Freeport-McMoRan Copper & Gold Inc., the world’s biggest producer of copper, gained 1% to US$71.32 as the price of the metal gained.

Citigroup Inc. fell 8.9% to US$4.12 after media reports that the lender is in talks with the US Treasury about how to sell the government’s 34% stake acquired during its financial rescue.

Stocks rose in Europe after the US retail sales rebound and stronger-than-expected New York manufacturing stoked optimism for the end of recession.

The Dow Jones Stoxx 600 Index gained 0.2% to 241.36. Among regional benchmarks, the UK’s FTSE 100 climbed 0.5% to 5042.13, Germany’s DAX 30 rose 0.2% to 5628.98 and France’s CAC 40 advanced 0.6% to 3752.21.

BT Group Plc, the UK’s biggest phone company, climbed 4.4% after Credit Suisse Group recommended buying the shares.

Rio Tinto, the world’s third-biggest miner, rose 1.7% and Xstrata Plx climbed 2% as prices of metals strengthened.

ArcelorMittal, the world’s biggest steel maker, rose 2.6% after Citigroup raised its rating to ‘buy’ from ‘hold.’

European stocks rose even after the ZEW Center for European Economic Research index of sentiment in Germany advanced to a less-than-expected 57.7 this month from 56.1 in August.

The yen and the greenback fell against the euro as stronger US retail sales helped stoke investors’ risk appetite, sending them in search of higher yields in other currencies.

The yen fell to 133.60 per euro from 132.94 and weakened to 91.08 against the dollar from 91.06. The euro strengthened to $1.4665from $1.4618.

Crude oil bounded more than US$2 a barrel as Bernanke’s comments and stronger economic data helped stoke speculation demand for fuel will rise.

Crude for October delivery rose 3% to US$70.93 a barrel on the New York Mercantile Exchange. Copper for December delivery rose 1.4% to US$2.845 a pound.

Gold futures for December delivery edged up 0.5% to US$1,006.30 an ounce in New York.

Businesswire.co.nz

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