Goldman Sachs suggested buying oil, copper and zinc, reversing last month’s call to sell commodities, while Morgan Stanley raised its forecast for Brent crude by 20 percent. Photographer: Phil Weymouth/Bloomberg
May 24 (Bloomberg) -- Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. in Sydney, talks about a drop in global equities. Oliver speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg) (Source: Bloomberg)
May 23 (Bloomberg) -- Jan Randolph, head of sovereign risk at IHS Global Insight, talks about Europe's sovereign debt crisis and whether policy makers will delay any solutions until 2013. Randolph speaks with Lisa Murphy on Bloomberg Television's "Fast Forward." (Source: Bloomberg)
May 23 (Bloomberg) -- David Blanchflower, a professor at Dartmouth College and Bloomberg Television contributing editor, talks about the European debt crisis. Blanchflower, a former policy maker at the Bank of England, speaks on Bloomberg Television's "InBusiness with Margaret Brennan." (Source: Bloomberg)
The euro depreciated against 13 of its 16 major counterparts. Photographer: Chris Ratcliffe/Bloomberg
Commodities rebounded from the biggest drop in almost two weeks after Goldman Sachs Group Inc. said it’s turning “more bullish” on raw materials. Asian stocks and U.S. equity-index futures gained, while the pound weakened.
Standard & Poor’s GSCI Index of 24 raw materials climbed 0.9 percent as of 4 p.m. in Tokyo, after yesterday plunging 1.7 percent. The pound sank 0.4 percent to 131.63 yen and declined 0.2 percent against the euro, while the Australian and New Zealand dollars climbed. The MSCI Asia Pacific Index gained 0.3 percent, halting a three-day slump. The Stoxx Europe 600 Index was little changed. S&P 500 Index futures increased 0.3 percent.
Goldman Sachs suggested buying oil, copper and zinc, reversing last month’s call to sell commodities, while Morgan Stanley raised its forecast for Brent crude by 20 percent. The Greek government endorsed an accelerated asset-sale plan and 6 billion euros ($8.4 billion) of budget cuts to win extra aid and stem a market slide. Moody’s Investors Service placed 14 U.K. financial institutions on review for a possible downgrade.
“We believe that the risk/reward once again favors being long commodities,” Goldman Sachs analysts led by London-basedJeffrey Currie said in an e-mailed report today. “Economic growth will likely be sufficient to tighten key supply- constrained markets in the second half, leading to higher prices from current levels.”
Brent rose 0.9 percent to $111.04 a barrel on the London- based ICE Futures Europe exchange. West Texas Intermediate crude for July delivery climbed 1.1 percent to $98.81 a barrel on theNew York Mercantile Exchange. Brent and WTI both fell more than 2 percent yesterday, helping send S&P’s GSCI Index of 24 raw materials to its biggest drop since May 11.
Capacity ‘Exhaustion’
Goldman Sachs, which suggested last month investors sell copper and oil, raised its three-, six- and 12-month forecasts forBrent crude futures as Libyan supply cuts lead to the “effective exhaustion” of spare production capacity in the Organization of Petroleum Exporting Countries. Morgan Stanley lifted its Brent oil forecast to $120 a barrel this year.
Copper for three-month delivery climbed 1 percent to $8,885 after earlier rallying to as much as $8,902 a metric ton on the London Metal Exchange. Prices tumbled 3.1 percent yesterday. Zinc futures advanced as much as 1.5 percent to $2,150.25 a ton, reversing yesterday’s 1.5 percent plunge.
The Australian dollar rose 0.5 percent to $1.0557, while New Zealand’s currency rallied 0.8 percent to 79.69 U.S. cents. South Korea’s won strengthened 0.4 percent to 1,093.41 per dollar, rebounding from a seven-week low.
Pound, Euro
The pound fell against all 16 most-active counterparts after Moody’s said it may lower the credit ratings of 14 British banks and building societies. Royal Bank of Scotland Plc and Santander U.K. Plc are among the institutions put on review for a downgrade, while Barclays Plc had the outlook on its senior debt changed to negative from stable, Moody’s said today.
Europe’s shared currency bought 114.91 yen from 115.20 yesterday. Greek Prime Minister George Papandreou’s Cabinet agreed yesterday to sell stakes in Hellenic Telecommunications Organization SA by the end of next month, as well as Public Power Corp SA, Hellenic Postbank SA and the country’s ports. Fitch Ratings, which cut Greece’s rating by three grades last week, yesterday lowered the outlook for Belgium’s AA+ investment-grade credit rating to negative.
“The most important thing going on in Europe is not just Greece; it’s the fact that that countries that were seen as somewhat protected are starting to be affected,” Shane Oliver, the head of investment strategy at AMP Capital Investors Ltd. in Sydney, said in a Bloomberg Television interview. “The worry list is very, very long.”
Growth Outlook
Economic reports yesterday showed China’s manufacturing may expand at a slower pace, a Federal Reserve Bank of Chicago economic gauge unexpectedly dropped below zero, while European services and manufacturing growth slowed more than forecast. Industrial orders in the euro area fell 1.1 percent from February, when they increased 0.5 percent, the European Union’s statistics office in Luxembourg will say today according to a Bloomberg News survey.
About five shares gained for every four that declined on MSCI’s Asia Pacific Index, which slumped 2.6 percent in the previous three days. South Korea’s Kospi index and India’s Bombay Stock Exchange Sensitive Index both rose 0.3 percent. Korea Zinc Co. jumped 6.6 percent inSeoul, pacing the rally in metal prices.
China’s Shanghai Composite fell 0.3 percent. The gauge earlier declined as much as 1.1 percent, taking its retreat from this year’s high to 10 percent. China CITIC Bank Corp. slid 2.4 percent, pacing losses in Shanghai. Goldman Sachs said today it won’t “rule out” a further decline of as much as 10 percent in Chinese shares as growth in the world’s second-biggest economy slows and inflation accelerates.
The brokerage cut its Asia ex-Japan economic growth forecast to 7.8 percent for 2011 to 2012, compared with an earlier prediction of 8.2 percent. It also reduced its 2012 per- share earnings estimate to 12 percent from 14 percent, analysts led by Timothy Moe said in a report.
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