Penny Stock Wallbusters

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Hmmmmmm....Stocks, Commodities, Pound Advance; Dollar, Treasuries Decline
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By Daniel Hauck

June 1 (Bloomberg) -- Stocks climbed, sending the MSCI World Index to the highest level since November, and oil and metals advanced as manufacturing in China signaled the worst of the global recession may be ending. Treasuries declined and the dollar fell against every major currency.

The MSCI World Index of 23 developed countries added 1.3 percent to 982.87 at 11:16 a.m. in London. Copper and oil also climbed to the highest levels in seven months. Gold traded within 1.2 percent of $1,000 an ounce in London. The pound rose above $1.64 for the first time since October.

Manufacturing in China expanded for a third month in May, the official Purchasing Manager’s Index showed. Economists estimated that U.S. manufacturing shrank at the slowest pace in eight months and Dow Chemical Co., the largest U.S. chemical maker, said its plants operated at 70 percent of capacity in April, up from 45 percent in December. Still, the global economy is contracting for the first time since World War II and General Motors Corp. plans to declare bankruptcy.

“The key market-driving dynamic remains improving global investor confidence in anticipation of a recovery in the global economy coupled with improving financial-market conditions,” Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a report. “The market has taken heart today from continued signs of growth in the Chinese manufacturing sector.”

GM Bankruptcy

Russia’s Micex index climbed 5.4 percent, the steepest gain among equity benchmarks in the world’s 25 biggest markets, after UBS AG said shares may jump another 30 percent this year. Europe’s Dow Jones Stoxx 600 Index advanced for the fifth time in six days, rising 2.1 percent as commodity producers increased, while futures on the Standard & Poor’s 500 Index added 1.7 percent.

Stocks rallied from Shanghai to Moscow and London even as Detroit-based GM, the world’s largest automaker for 77 years, prepared to become the largest manufacturer to file for bankruptcy. GM has said it aims to reduce its U.S. hourly workforce to about 40,000 next year from 61,000 at the end of last year. A report this week will show unemployment in the U.S. surpassed 9 percent in May for the first time in more than 25 years, according to a Bloomberg survey of 59 economists.

U.S. bonds dropped, driving the yield on the benchmark 10- year note six basis points higher to 3.52 percent, as Treasury Secretary Timothy Geithner arrived in Beijing to reassure China its holdings of U.S. debt are safe even as government borrowing soars. The gap between yields on two-year and 10-year notes widened five basis points to 259 basis points.

China to Norway

The bond market shows international demand for American financial assets is as high as ever, even as the dollar slides and the U.S. deficit expands.

The Federal Reserve’s holdings of Treasuries on behalf of central banks and institutions from China to Norway rose by $68.8 billion, or 3.3 percent, in May, the third most on record, data compiled by Bloomberg show. The U.S. Treasury said bidding from foreigners was above average at its $101 billion of note auctions last week.

Universa Investments LP, which has links to “Black Swan” author and New York University professor Nassim Nicholas Taleb, is starting a hedge fund to bet that efforts by governments and central banks to end the global recession will lead to hyperinflation, the Wall Street Journal reported, citing Taleb. The fund will invest in commodities and options on oil and gold stocks, the Journal said.

Australian Dollar

The dollar declined the most against currencies of commodity producers, sliding 1.7 percent versus Norway’s krone and the New Zealand dollar. The Australian dollar climbed 1.6 percent, touching the strongest since September.

Prices of raw materials account for more than 50 percent of exports in New Zealand and Australia, while interest rates higher than borrowing costs of 0.1 percent in Japan and as low as zero in the U.S. also attracted investors. The risk in so- called carry trades is that sudden exchange-rate movements can erase profits.

The Dollar Index declined to the lowest level this year as the U.S. government said it will own a majority of GM after the carmaker’s bankruptcy, heightening concern that record debt sales to fund bailout packages and economic stimulus programs will weigh on the currency.

The pound advanced as much as 1.5 percent to $1.6431, the strongest level since Oct. 31, after a report showed U.K. house prices stopped falling last month. Average house prices in England and Wales were unchanged in May, a survey of real-estate agents by Hometrack Ltd. showed today.

Oil, Copper, Gold

Crude oil for July delivery rose as much as $1.98 to $68.29 a barrel on the New York Mercantile Exchange, after China, the world’s second-biggest energy consumer, expanded manufacturing and raised domestic gasoline and diesel prices.

Copper for delivery in three months climbed 3.5 percent to $5,000 a metric ton on the London Metal Exchange, the highest compared with intraday prices since Oct. 15. Gold for immediate delivery advanced as much as 0.9 percent to $987.80 an ounce, while silver added 1.4 percent to $15.955 an ounce, the highest since Aug. 8.

The MSCI Emerging Markets Index climbed 2.6 percent, the most in two weeks. The gauge surged 55 percent the past three months, the steepest gain since its inception in December 1987 and more than the 29 percent rally in MSCI’s developed-market stock measure.

Poland’s zloty appreciated 1.4 percent against the euro and 1.9 percent against the dollar, the top gains among currencies in 22 developing nations tracked by MSCI. Russia’s ruble added 1.1 percent against the dollar, bolstered by oil’s rise.

Credit-default swaps on the Markit iTraxx Crossover Index of 45 companies with mostly high-yield credit ratings dropped 14 basis points to 710, the lowest since Oct. 15, according to JPMorgan Chase & Co. prices. Contracts on European automakers including Munich-based Bayerische Motoren Werke AG and Stuttgart, Germany-based Daimler AG fell, CMA DataVision prices showed. Declines signal an improvement in perceptions of credit quality.