Treasuries, Gold Gain as Dollar Falls; Most Stocks Rise

Ten-year Treasuries and gold surged, while the dollar slid and most stocks rose, as weaker-than- forecast jobs growth spurred bets the Federal Reserve will undertake more stimulus. The euro climbed as plans to contain the credit crisis sent Spanish and Italian bonds higher.

Ten-year Treasury yields fell two basis points to 1.66 percent and gold futures increased 2 percent to $1,740.50 an ounce, a six-month high. The Dollar Index (DXY), a gauge of the currency against six major peers, slid 1 percent to the lowest level since May as the euro rallied 1.3 percent to $1.2796. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,437.05, above its highest closing level since January 2008.

A visitor watches stock price movements inside the Madrid stock exchange in Madrid. Photographer: Angel Navarrete/Bloomberg

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Sept. 7 (Bloomberg) -- Mohamed El-Erian, chief executive officer and co-chief investment officer of Pacific Investment Management Co., talks about the August U.S. employment report and the outlook for Federal Reserve policy. He talks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

America added 96,000 workers last month following a revised 141,000 rise in July that was smaller than first estimated, trailing the median estimate of economists surveyed by Bloomberg for a gain of 130,000. Unemployment unexpectedly fell to 8.1 percent as more Americans left the workforce, and hourly earnings were unchanged. Fed Chairman Ben S. Bernanke said last week he wouldn’t rule out more stimulus to bolster a job market he described as “a grave concern.”

“It’s a disappointing report across the board and it puts the Fed in the driver’s seat for additional quantitative easing,” said Chad Morganlander, a Florham Park, New Jersey- based fund manager at Stifel Nicolaus & Co., which oversees about $120 billion of assets. “It’s not a negative number, but there is very little vibrancy to the report and the trend is dismal. It lacks the get-up-and-go that we need to get the economy moving again.”

Treasuries, Commodities

Yields on 30-year Treasury bonds rose two basis points to 2.81 percent, erasing earlier declines, while two-year rates lost one point to 0.25 percent. The dollar weakened against 15 of 16 major peers, losing at least 1.4 percent versus the South African rand, Norwegian krone and Swedish krona.

Copper, zinc and silver jumped more than 3 percent for the biggest gains in the S&P GSCI Index of commodities, sending the gauge up 0.8 percent. Copper gained 3.7 percent to $3.645, the highest since May 14, as China approved plans to build 2,018 kilometers (1,254 miles) of roads and other infrastructure programs, spurring the nation’s biggest stock-market rally in almost eight months. The country is the biggest buyer of the metal.

While today’s jobs data trailed forecasts, better-than- projected reports over the past three months have pushed the Citigroup Economic Surprise Index for the U.S. to an almost five-month high. The index, which measures how much data is beating or missing the median estimates in Bloomberg surveys, climbed 15 today after yesterday rising above zero for the first time since April.

Fed Meeting

The Federal Reserve’s Open Market Committee meets next week to discuss policy and will release a statement on Sept. 13 after a two-day meeting. Bernanke told a gathering of central bankers in Jackson Hole, Wyoming, last week that the first two rounds of quantitative easing through asset purchases have helped stabilize the economy.

“We have this push and pull between economic momentum and and the policy response,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “The expectation is if the economic data is soft, then the Fed, the European Central Bank and the Chinese will spend more money on the policy front.”

Market Leaders

More than three shares rose for every two that fell in the U.S. Producers of raw materials and energy rose more than 1.4 percent for the biggest gains among 10 industry groups in the S&P 500, with Exxon Mobil Corp. rising 0.9 percent and Freeport- McMoRan Copper & Gold Inc. jumping 8.9 percent to pace the advance. Telephone and consumer-staples companies fell the most. Intel Corp., the world’s largest semiconductor maker, lost 3.8 percent after cutting its third-quarter revenue forecast.

The S&P 500 surged 2 percent yesterday as the European Central Bank announced plans for unlimited bond purchases to stem the debt crisis. While the S&P 500 in August reached its highest level on an intraday basis since 2008, yesterday was the first time it closed at a multi-year high since April. The index has risen 14 percent this year as European leaders worked to tame the region’s debt crisis and the Fed vowed to safeguard the economic recovery.

$1.9 Trillion

The $1.9 trillion restored to U.S. equity prices in 2012 has pushed the S&P 500 within 10 percent of a record, more than 7 percentage points closer than any country among the world’s biggest stock markets. More gains are likely as bearish investors give up and start buying, according to Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut.

“They realize it isn’t working,” Birinyi, an equity trader for Salomon Brothers Inc. in the 1980s, said in a telephone interview. “The excuses of no volume and earnings aren’t going to be good -- that’s not happening, and maybe it’ time to join the party.”

Ten-year Spanish yields tumbled 40 basis points to 5.63 percent and Italian rates lost 20 basis points to 5.06 percent, the lowest since April for both, after ECB President Mario Draghiannounced the bond-buying program for struggling nations yesterday. Portugal’s bonds rose for a sixth straight week, sending 10-year yields to 8.10 percent, the lowest in almost 18 months.

European Shares

Two stocks gained for each that fell in the Stoxx 600. The volume of shares changing hands on the Stoxx 600 was double the average of the last 30 days, data compiled by Bloomberg show. Banks and commodity producers led gains, with Portugal’s Banco Espirito Santo SA surging 8 percent and Germany’s Commerzbank AG rising 6.7 percent.

Xstrata Plc (XTA) rallied 3.6 percent. Glencore International Plc, the world’s biggest publicly traded commodities supplier, raised its proposed takeover bid for the mining company. Glencore shares fell 3.6 percent.

The euro climbed above 100 yen for the first time since July 5 as the shared currency strengthened against 13 of 16 major peers. The Swiss franc touched the lowest level in almost six months against the 17-nation currency.

The MSCI Emerging Markets Index (MXEF) climbed 2 percent, the most in six weeks. South Korea’s Kospi (KOSPI) index jumped 2.6 percent after Fitch Ratings upgraded the country’s debt. India’s Sensex jumped 2 percent and benchmark gauges in Russia, Hungary and theCzech Republic rose more than 1 percent.