Stocks, commodities rise on U.S. budget optimism; dollar weakens

Global stocks snapped the longest losing streak in almost a year amid optimism a deal can be reached to avoid automatic U.S. spending cuts and tax increases. Oil led commodities higher. The dollar and Treasuries fell.

The MSCI All-Country World Index advanced 1.8 percent as of 12:57 p.m. in New York, ending an eight-day decline, and the Standard & Poor’s 500 Index jumped 1.6 percent for its biggest gain in two months. Oil rose more than 3 percent amid concern Middle East unrest will disrupt supply. Treasury 10-year yields rose four basis points to 1.62 percent. The dollar weakened against all 16 major counterparts.

House Speaker John Boehner and White House Press Secretary Jay Carney described a Nov. 16 meeting on the so-called fiscal cliff as “constructive.” European finance ministers are due to meet in Brussels tomorrow as they aim to craft a plan for Greece’s next aid payout. Existing home sales climbed more than forecast last month and a gauge of builder confidence reached a six-year high, bolstering confidence in the housing market.

“This change and transition in taxation is much more important for equity allocations going forward than what people realize,” said Michael Shaoul, chairman of New York-based Marketfield Asset Management, which oversees $3.5 billion. He spoke in a phone interview. “The U.S. economy looks pretty good. Earnings are OK. As long as Congress doesn’t absolutely wreck it, it will be fine.”

U.S. Stocks

Bank of America Corp., Verizon Communications Inc., Hewlett-Packard Co. and JPMorgan Chase & Co. surged more than 2.6 percent for the biggest gains in the Dow Jones Industrial Average. Cisco Inc. rose 1.5 percent after the world’s largest maker of computer-networking equipment agreed to pay $1.2 billion for closely held Meraki Inc.

The S&P 500 Index increased 0.5 percent on Nov. 16, the first gain in four days, after Boehner said talks with Obama were constructive and he would accept an increase in government revenue if coupled with spending cuts.

“I am confident we can get our fiscal situation dealt with,” Obama said at a news conference in Bangkok yesterday, spurring optimism lawmakers would reach an agreement to avoid a $607 billion deficit-cutting package known as the fiscal cliff.

An S&P index of 11 homebuilders rallied 1.6 percent, extending its two-day gain to 5 percent. The National Association of Home Builders/Wells Fargo index of builder confidence rose to 46, the highest level since May 2006.

Existing home sales increased 2.1 percent to a 4.79 million annual rate, exceeding the median forecast of economists surveyed by Bloomberg, figures from the National Association of Realtors showed. The median price rose from a year ago as inventories dropped to the lowest level in almost a decade.

The Dollar Index fell 0.5 percent, the most in almost two weeks. The U.S. currency weakened 0.5 percent to $1.2801 per euro and fell 0.2 percent to 81.18 yen. The Australian dollar climbed 0.6 percent to $1.0400. The won strengthened 0.5 percent to 1,086.98 per dollar.

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