By Agency Reporter

Tuesday, 4 Jan 2011

Stocks rallied, sending the Standard & Poor‘s 500 Index to its biggest advance in a month, and oil climbed on speculation America‘s growth will strengthen as China‘s expansion moderates.

Bloomberg reported from London that treasuries slid.

The S&P 500 increased 1.1 per cent to 1,271.05 in New York and the Stoxx Europe 600 Index gained one per cent for its largest gain since December 21.

Oil rose to a 27-month high. The 10-year Treasury note fell, sending the yield 10 basis points higher. Markets in London, Shanghai, Tokyo and Sydney were closed for holidays.

United States factory output accelerated, a report today showed, while data later this week might indicate growth in services and employment. European manufacturing expanded more than initially estimated in December, London-based Markit Economics said.

China‘s purchasing managers‘ index fell for the first time in five months, suggesting efforts to cool the economy are working, according to figures released on January 1.

”The overall situation is very constructive,” said Mr. Jonathan Fayman, a fund manager at BlueBay Asset Management Plc in London, which oversees about $38bn. ”Seems people held back into the end of the year and were waiting to re-enter risk positions in the New Year, which is what they‘ve done. Commodities are also trading very well.”

The S&P 500 added to last year‘s 13 per cent advance, which capped the biggest two-year rally since the end of the 1990s. Financial and technology companies led gains in all 10 of the index‘s main industry groups today. The 10-year Treasury yield rose to 3.39 per cent, while the yield on the two-year note increased four basis points to 0.64 per cent.

The Institute for Supply Management‘s manufacturing index rose to 57 from 56.6 in November. A reading greater than 50 points indicates expansion and the figure matched the median forecast in a Bloomberg News survey of 63 economists. Projections ranged from 55 to 60.

Bank of America Corporation rallied 4.4 per cent after resolving disputes with Freddie Mac and Fannie Mae by agreeing to pay more than $2.6bn to settle claims it sold loans based on faulty information.

About eight stocks rose for every one that fell on the Stoxx 600, which extended last year‘s 8.6 per cent advance. Porsche SE jumped by 13 per cent as a US judge dismissed claims against the carmaker for more than $2bn.

Volkswagen AG increased 4.1 per cent after extending Chief Executive Officer, Mr. Martin Winterkorn‘s contract by five years.

Lagardere SCA climbed 9.2 per cent, as France‘s biggest publisher began talks to sell its international magazine business. JCDecaux SA, the world‘s second-biggest seller of outdoor advertising, advanced 2.1 per cent after saying it does not ”feel any deceleration” in its Chinese business.

The MSCI Emerging Markets Index increased one per cent, advancing for a fifth day to the highest since June 2008. South Korea‘s Kospi index closed at a record high after exports increased for the 14th month. Benchmark gauges in Brazil, Turkey, Hungary and the Czech Republic gained more than one per cent.

Oil advanced as much as 1.1 per cent to $92.39 a barrel, before paring gains to trade at $92.17.

The Dollar Index, which tracks the US currency against those of six trading partners, climbed 0.2 per cent. The US currency appreciated 0.3 per cent against the euro. The euro, which Estonia adopted on January 1 to become the 17th member of the currency region, depreciated 6.5 per cent against the dollar last year, its worst performance since 2005, as the sovereign-debt crisis roiled the bloc‘s weakest economies.

The common currency declined against 11 of its 16 major counterparts.

Source: Punch