Dow rises to record as Treasuries advance, oil rebounds

Economic Data

The Conference Board’s index of U.S. leading indicators, a gauge of the outlook for the next three to six months, increased 0.7% in September. The median forecast of economists surveyed by Bloomberg called for a gain of 0.6%.

A government report tomorrow is forecast to show the U.S. economy grew at a 2% annualized rate in the third quarter, compared with a 2.5% increase in the previous three months. Economists predict data on Friday will show payrolls climbed by 120,000 in October and the unemployment rate increased to 7.3% from 7.2% in the previous month, according to a separate survey.

Fed policy makers last week signaled diminishing concern over higher borrowing costs as they maintained their $85 billion-a-month bond buying program and sought more evidence of sustained growth before tapering the record stimulus. The Fed won’t reduce the pace of purchases until its March 18-19 meeting, according to the median estimate in a Bloomberg survey of economists conducted Oct. 17-18.

Fed Papers

William English, head of the Fed’s Division of Monetary Affairs, wrote that the strategy of not raising interest rates if unemployment is above 6.5% has provided effective stimulus, and that an even lower threshold could be helpful. A paper by David Wilcox, the research and statistics chief, says that slack in the economy argues for loose policy at a time of contained expectations for inflation.

The Stoxx 600 advanced 0.4% to the highest level since May 2008. ING jumped 3.5%. Alstom SA, the French maker of power equipment and trains, rallied 5.8% after operating profit topped estimates. Vestas Wind Systems A/S surged 15% to a two-year high after the world’s largest wind turbine maker boosted its outlook for 2013.

The euro advanced 0.3% to $1.3520 and 0.5 versus the yen as a gauge showed the region’s services output increased more than initially estimated, boosting speculation the European Central Bank will refrain from cutting interest rates tomorrow.

The euro may rise to a two-year high versus the U.S. dollar if it holds a key level of support, according to Bank of America Corp., citing technical indicators.

Euro Predictions

The 17-nation currency’s ability to keep from weakening beyond the area from $1.3412 to $1.3452 will confirm a longer- term bullish trend for the euro, MacNeil Curry, head of foreign- exchange and interest-rates technical strategy in New York at Bank of America Merrill Lynch, wrote in a client note yesterday. If the euro can appreciate beyond its October high to $1.3835, it will test $1.40, which would be its strongest level since October 2011.

Japan’s Topix advanced for the first time in four days, rising 0.8%. Toyota increased 0.5% as NHK reported the company would raise its earnings forecast. The company lifted its full-year profit projection by 13% in a statement as Tokyo markets shut.

Japan’s yen weakened the most against the Norwegian and Swedish currencies, losing more than 0.6% versus each.

German Manufacturing

German manufacturing orders, adjusted for seasonal swings and inflation, jumped 3.3% from August, when they fell 0.3%, the Economy Ministry said today. Economists forecast a gain of 0.5%, according to the median of 37 estimates in a Bloomberg News survey.

Italian bonds reversed early gains, sending 10-year yields up four basis points to 4.21%. The nation sold 22.3 billion euros ($30 billion) of government inflation-linked bonds aimed at retail investors, setting a new record and allowing the Treasury to potentially cut the size of bond auctions for the rest of the year. The yield on 10-year Portuguese bonds dropped 20 basis points to 5.89%.

The MSCI Emerging Markets Index was little changed after a four-day slump. Egypt’s EGX 30 Index jumped 2.4% to the highest level since January 2011 as trading resumed after a holiday yesterday and the trial of deposed President Mohamed Mursi was adjourned until January. The Shanghai Composite Index dropped 0.8% before the start of a Communist Party meeting later this week.

Commodity Rebound

The S&P GSCI rebounded from the lowest level since June 26 yesterday, climbing for the first time in seven days. WTI oil gained 1.5%, the most in five weeks, to $94.80 a barrel. Gasoline jumped 1.2% and natural gas increased 1%.

The Energy Information Administration reported gasoline consumption climbed 2.6% last week to 9.29 million barrels a day. Supplies decreased by 3.76 million barrels, more than nine times the 400,000-barrel decrease forecast by analysts in a Bloomberg survey. Oil stockpiles jumped for a seventh week.

Gold futures gained 0.7%, the biggest advance in almost two weeks, to settle at $1,317.80 an ounce as a weakening dollar signaled investors expect tomorrow’s government reports will show sluggish U.S. economic growth. Palladium extended a rally to the highest price since August.

Coffee fell to the lowest since December 2008 on speculation that bigger crops in Brazil, the world’s largest grower, will compound a global glut. Sugar and cocoa also declined, while cotton and orange juice gained.

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