The MSCI World added 0.9% at 11:02 am in London, extending its advance in May to 7.9%. The gauge of 23 developed nations has climbed for three straight months, the best performance since the middle of 2007, when the value of securities tied to subprime mortgages collapsed, freezing credit markets.
Oil rose 1.2% to $65.87 in New York, the highest in almost seven months, as investors speculated more than $13 trillion in government stimulus measures will alleviate the worst contraction since the Great Depression after $1.47 trillion in losses and writedowns at the worlds biggest financial companies. Japans industrial output increased the most since 1953 in April, Indias economy grew more than analysts estimated last quarter, and Poland expanded in the first quarter, government reports showed.
Theres certainly some relief at the moment as the rate of deterioration appears to have slowed, said John Anderson, who helps oversee $3 billion at Rensburg Fund Management in London. The banking sector is out of the intensive care unit. But I suspect it will take a while before we fully recover given the sheer amount of debt out there.
The US dollar weakened 1% against the euro and 0.9% against the yen, extending its drop after the Dollar Index slid below 80. The gauge tracks the greenback against the euro, yen, pound, Swiss Franc, Canadian dollar and Swedish krona.
The dollar dropped 1.5% versus the Australian dollar and 1.7% against the New Zealand dollar, as signs of a recovery stoked demand for commodity-exporting countries. The greenback also slipped as South Koreas National Pension Service, which had about $187 billion of assets at end-2008, pared its allocation for Treasuries over the next five years.
The pound rose to the highest level since November, poised for its biggest monthly gain in 24 years, after a report showed UK house prices unexpectedly jumped in May. The pound strengthened to as much as $1.6128, before trading up 1.1% at $1.6111.
Yields on 10-year Treasury notes slipped two basis points to 3.59% after soaring to the highest since November this month. The difference in yields between two-year and 10-year securities was 264 basis points on Friday. It increased to 276 basis points on May 27, the widest on record.
The bond market seems to be testing the credibility of the Fed, said Mickael Benhaim, head of global bonds at Pictet & Cie Banquiers in Geneva. Yields are rising, suggesting investors are demanding inflation premiums. I think the exit of this crisis will be reflationary given all the liquidity that has been thrown into the market and the huge level of indebtedness at the national level.
European government bonds snapped five days of losses, with the 10-year bund yield falling six basis points to 3.60%.
Oil is headed for its biggest monthly gain since March 1999, when Asia was recovering from the 1997-1998 financial crisis and fuel demand started rising in China and India. US crude inventories fell more than analysts estimated while the Organization of Petroleum Exporting Countries left production quotas unchanged at a meeting in Vienna on Thursday, betting on a recovery in demand.
Copper for delivery in three months rose as much as 0.6% to $4,777 a metric ton on the London Metal Exchange, a three-week high. Gold for immediate delivery added as much as 1.1% to $969.80 an ounce, the highest in three months.
Silver rose almost 2%, heading for its biggest monthly gain in 22 years as the dollars drop increased demand for precious metals as an alternative investment.
The ruble strengthened 1.2% to 30.9640 versus the dollar, extending this months gain to 7%. South Africas rand gained as much as 1.1% to 7.9335 against the US currency, the lowest since September.
The extra yield investors demand to hold company bonds rather than government debt narrowed as investors sought the higher returns on corporate securities. The spread tightened to 3.18 percentage points, from 3.71 percentage points a month ago and 4.63 on March 20, according to Merrill Lynch & Cos Euro Corporates index.
Corporate bond sales in euros and pounds surged to a record 603 billion euros ($844 billion) this year, almost double the 358 billion euros issued in the same period of 2008, according to data compiled by Bloomberg. Paris-based Pernod Ricard SA, the worlds second-largest distiller, and Virgin Media Inc this week sold the biggest junk bonds in Europe since the credit crunch froze issuance two years ago.
The Dow Jones Stoxx 600 Index of European shares added 1.1% on Friday as commodity producers advanced, extending its monthly gain to 5%. Futures on the Standard & Poors 500 Index climbed 0.6% before reports that economists said may show confidence among US consumers gained in May for a third month and business activity shrank the least since September.
US gross domestic product shrank at a 5.5% annual rate from January through March, compared with an initial 6.1% estimate, data from the commerce Department may show. The dworlds largest economy shrank at a 6.3% annual rate in the last three months of 2008. Chinas growth prospects have improved from three months ago, according to a Bloomberg survey of 14 economists.
BHP Billiton Ltd., the worlds largest mining company, rose 3% to 1,474 pence on the increase in metals prices. Rio Tinto Group, the third-biggest mining company, gained 1.2% to 2,789 pence. Both companies are based in London.
Oils advance sent Paris-based Total SA, Europes third- largest oil company, up 1.6 percent to 40.70 euros. London-based Royal Dutch Shell Plc rose 1.1% to 1,663 pence.