Yen Strengthens to Record Against Dollar as Stocks Fluctuate, Metals Gain

By Stephen Kirkland and Shiyin Chen - Oct 26, 2011 5:08 PM GMT+0700

The yen strengthened to a post-World War II high against the dollar while European stocks were little changed before the region’s leaders meet to discuss the debt crisis. Metals rallied after comments from Chinese Premier Wen Jiabao stoked speculation the nation will ease monetary policy.

The yen climbed as much as 0.5 percent to 75.72 per dollar, before trading at 75.81 at 6:05 a.m. in New York. The Stoxx Europe 600 Index increased 0.1 percent, while shares in emerging markets gained for a fourth day. Standard & Poor’s 500 futures added 0.6 percent following the U.S. gauge’s 2 percent drop yesterday and Treasuries declined. Copper climbed 2.9 percent and gold advanced to a one-month high.

European leaders are holding the 14th crisis summit in 21 months today to discuss Greece’s second bailout, shoring up banks and strengthening the 440 billion-euro ($613 billion) rescue fund. European Central Bank Executive Board member Juergen Stark said additional sovereign bond purchases by the ECB creates the wrong incentive to governments, Germany’s Stern magazine reported. Wen said China’s economic policy will be fine-tuned as needed and the industry ministry said it is studying “stimulative policies” for smaller companies.

“There is scope for great disappointment” from the European summit, Gary Jenkins, head of fixed income at Evolution Securities in London, said in a report. “Though if there seems to be general agreement on the bigger scheme and a tight timeframe for the details to be worked out markets may give them the benefit of the doubt.”

ECB Loan Demand

The euro gained against 11 of its 16 main counterparts, advancing 0.2 percent to $1.3940. The Australian dollar fell versus all 16 of its peers after a report showed inflation slowed.

The yield on 10-year German bunds rose four basis points to 2.10 percent. Demand for 12-month loans from the ECB was weaker than analysts forecast, with banks borrowing 56.9 billion euros, less than the 70 billion euros forecast in a Bloomberg survey of analysts.

Italian two-year yields were little changed at 4.52 percent after the government sold 8.5 billion euros of 182-day notes and 2 billion euros of 2013 bonds. Prime Minister Silvio Berlusconi agreed with Umberto Bossi, leader of the Northern League, which holds the key to Berlusconi’s parliamentary majority, to bring elections forward to 2012 in exchange for reforms on pensions, liberalization and bureaucracy, la Repubblica reported.

The Stoxx 600 fluctuated between gains and losses at least seven times today. Merck KGaA jumped 5.6 percent as the German maker of the Erbitux cancer drug reported profit that beat analysts’ estimates. Celesio AG, Europe’s largest drug wholesaler, slid 4.4 percent after reducing its 2011 earnings forecast for the second time this year.

IBM, Amazon

The increase in S&P 500 futures indicated the U.S. equities gauge will rise for the fourth time in five days. International Business Machines Corp. advanced 0.7 percent in German trading after naming Virginia Rometty to succeed Sam Palmisano as chief executive officer. Amazon.com Inc., the world’s largest Internet retailer, tumbled 11 percent in pre-market New York trading after posting lower-than-estimated earnings.

Boeing Co., ConocoPhillips and Lockheed Martin Corp. are among 51 companies in the S&P 500 due to report earnings today. Three-quarters of the 162 companies to have released results since Oct. 11 have topped analysts’ estimates, according to data compiled by Bloomberg.

U.S. economic reports today may show orders for durable goods excluding transportation equipment rose and new home sales increased, according to Bloomberg surveys of economists. Commerce Department data tomorrow is forecast to show gross domestic product expanded at a faster pace in the third quarter.

Debt Sales

Treasuries declined, with the 10-year yield rising four basis points to 2.15 percent. The government plans to auction $35 billion of five-year notes, while the Federal Reserve sells between $8 billion and $9 billion of notes as part of its quantitative-easing program.

The S&P GSCI index of 24 commodities rose 0.4 percent, the fourth increase and the longest streak of gains in two weeks. Gold jumped as much as 0.9 percent to $1,720.05 an ounce, the highest since Sept. 23. Oil in New York rose 0.5 percent to $93.66 a barrel, the fourth consecutive advance.

The MSCI Emerging Markets Index added 0.4 percent. The Shanghai Composite Index jumped 0.7 percent and Russia’s Micex Index increased 1.9 percent. Turkey’s ISE National 100 Index slipped 0.7 percent after the central bank halted daily lending at the one-week repo rate, while the lira strengthened 0.8 percent against the dollar as policy makers increased the amount of foreign-exchange reserves for lenders.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net;

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net