Commodities rise on China as Treasuries gain on consumer prices

Commodities rose after the biggest rally in Shanghai’s benchmark stock index in three years as manufacturing reports in China and the U.S. fueled optimism in the economy. Treasuries climbed following a decrease in consumer prices, while U.S. stocks were little changed.

The Standard & Poor’s GSCI gauge of 24 materials climbed 0.4 percent at 9:45 a.m. in New York as energy and agricultural products led gains. Ten-year U.S. Treasury yields decreased two basis points to 1.71 percent after rising for three days. The S&P 500 was little changed near 1,419, while the Stoxx Europe 600 Index drifted between gains and losses. The dollar weakened against 12 of 16 major peers. Spanish and Italian bonds rose.

Reports earlier today showed China’s factory production may expand at a faster pace this month, while confidence worsened among Japanese manufacturing companies. President Barack Obama and Republican House Speaker John Boehner remained deadlocked yesterday during their third White House meeting on next year’s budget. The cost of living in the U.S. dropped last month for the first time since May.

“The most recent China manufacturing data is indeed encouraging for commodities as China is still one of the biggest consumers for many natural resources,” said Frederique Dubrion, president and chief investment officer of Blue Star Advisors SA in Geneva. “Monetary-easing programs and the stabilizing global outlook will give more opportunity within materials.”

CPI Data

The 0.3 percent decrease in the consumer-price index followed a 0.1 percent gain the prior month, the Labor Department reported today in Washington. The median estimate of 80 economists surveyed by Bloomberg called for a 0.2 percent drop. The core index, which excludes volatile food and energy costs, climbed less than projected.

Oil rose 0.4 percent to $86.27 a barrel in New York, while gasoline, heating oil and soybeans climbed at least 1 percent to lead gains in commodities. Nickel and zinc rose at least 0.5 percent. China is the world’s biggest buyer of industrial metals.

The S&P 500 slipped from an almost two-month high yesterday amid deadlock over the U.S. budget debate. The index tumbled as much as 5.3 percent after the Nov. 6 election set up a budget showdown between President Barack Obama and House Republicans, then recovered most of the drop.

Among U.S. stocks, Adobe Systems Inc. rallied 5.6 percent in early New York trading after reporting fiscal fourth-quarter sales and profit that exceeded analysts’ estimates.

More than three stocks rose for every two that fell on the Stoxx 600. Akzo Nobel surged 7.6 percent, its biggest advance in 14 months, as PPG Industries Inc. agreed to buy the Dutch company’s North American paint business for $1.05 billion.

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