Most Stocks Gain as Dollar Holds Losses on Improved U.S. Economic Outlook

By Shiyin Chen and Bruce Stanley - Dec 27, 2011 5:49 AM GMT+0700

Most stocks (MXAP) climbed, helping the MSCI All Country World Index gain for a fifth day, while the dollar maintained losses against higher-yielding peers amid speculation the U.S. economy will continue to recover. China’s yuan surged to a 17-year high.

MSCI’s global index advanced less than 0.1 percent at 4:51 p.m. in New York as equity gauges in Japan, India, Russia and Mexico rose 0.5 percent or more. About four shares advanced for every three that declined on the global benchmark, helping it extend last week’s 3.1 percent advance.

Financial markets from Hong Kong to the U.K. and the U.S. were closed for holidays. The dollar weakened 0.1 percent to $1.3059 per euro amid reduced demand for haven assets. The yuan touched 6.3160 versus the greenback, the strongest level since 1993, on speculation China’s policy makers will tolerate appreciation to stem capital outflows.

Reports tomorrow may show home prices in 20 U.S. cities declined at a slower pace and consumer confidence improved to a five-month high. Data last week showed durable goods orders jumped in November by the most in four months, while sales of new homes increased to a seven-month high.

“The U.S. economy is improving more than expected,” said Hideyuki Ishiguro, assistant manager at the investment strategy department at Okasan Securities Co. in Tokyo. “Pessimism is easing among American consumers due to a recovery in the job market and some stability in the stock market.”

Latin American Stocks

Mexico’s IPC advanced 0.5 percent. Brazil’s Bovespa index slid 0.1 percent as economists cut their 2011 forecasts for a fifth straight week.

Japan’s Nikkei 225 Stock Average added 1 percent, the BSE India Sensitive Index jumped 1.5 percent, while Russia’s Micex Index gained 1 percent. Canon Inc. (7751) climbed 1.3 percent after the Nikkei newspaper reported that the camera maker may pay a 120 yen ($1.54) dividend this year.

The Bloomberg GCC 200 Index of Persian Gulf shares rose less than 0.1 percent to 54.89 while Israel’s TA-25 index gained 0.7 percent.

The S&P 500 (SPX) added 0.9 percent on Dec. 23, erasing its losses for this year, after Commerce Department data showed orders for goods meant to last at least three months rose 3.8 percent in November. A separate report showed purchases of single-family properties increased 1.6 percent to a 315,000 annual pace, while consumer spending rose less than forecast in November as wages declined for the first time in three months.

Consumer Confidence

Property values probably dropped 3.2 percent in October from the same month in 2010, the smallest year-over-year decrease since January, according to the median forecast of 20 economists before a report from S&P/Case-Shiller. Consumer confidence may have climbed to a five-month high of 58.6 in December from 56 last month, a separate survey showed before tomorrow’s report from the New York-based Conference Board.

“Excessive pessimism has receded at the end of the year, and what we’re seeing is some unwinding of safe-haven buying of currencies like the dollar and yen,” said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest listed bank by market value. “The U.S. economy is resilient.”

The Dollar Index, which tracks the U.S. currency against those of six trading partners, fell less than 0.1 percent after sliding last week. The Australian dollar rose 0.2 percent to $1.0169 and Turkey’s lira gained 0.5 percent to 1.8926 per dollar.

Yuan Gains

The yuan strengthened 0.3 percent to 6.3198 per dollar as the central bank set the reference rate 0.07 percent higher at 6.3167 per dollar. A depreciation of the yuan may fuel outflows of capital, Yi Xianrong, a researcher at the Institute of Finance and Banking that is affiliated to the Chinese Academy of Social Sciences, wrote in a commentary in the China Daily.

Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said at a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday.

Gold for immediate delivery retreated as much as 0.5 percent to $1,597.75 an ounce before trading at $1,606.90 an ounce. Copper declined 1.2 percent to 55,200 yuan ($8,735) a metric ton in Shanghai, the first retreat in five days. The London Metal Exchange and Comex are closed today.

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Bruce Stanley in Dubai at bstanley5@bloomberg.net

To contact the editor responsible for this story: Sheldon Reback at sreback@bloomberg.net