Asian Stocks Gain, Copper Rises to Record; Treasuries Decline

Dec. 27 （Bloomberg） -- Asian stocks climbed, copper rallied to a record and Treasuries fell on speculation global growth will accelerate in 2011 and that China will succeed in taming inflation.

The MSCI Asia Pacific Index rose 0.3 percent to 135.64 as of 3:48 p.m. in Tokyo. Standard & Poor’s 500 Index futures fell 0.3 percent. Copper jumped as much as 0.9 percent to $4.2985 a pound in New York while crude oil rose for a sixth day. U.S. 10- year yields increased four basis points to 3.43 percent. The dollar was near a three-week high against the euro.

The People’s Bank of China boosted its key one-year lending and deposit rates by 25 basis points on Christmas Day, with JPMorgan Chase & Co. and Morgan Stanley predicting further tightening in the first half. Premier Wen Jiabao said yesterday the government is confident of its ability to control inflation while data tomorrow will likely show improving consumer confidence in the U.S., where markets reopen after a holiday.

“The global economy recovered this year and will keep growing in 2011,” said Hiroki Shimazu, a Tokyo-based economist at Nikko Cordial Securities Inc., part of Sumitomo Mitsui Financial Group Inc., Japan’s third-largest publicly traded bank by assets. “There is inflation pressure in the U.S. and in China. Equities will offer better opportunities than bonds next year.”

Three stocks advanced for every two that fell on the MSCI Asian index. Japan’s Nikkei 225 Stock Average advanced 0.8 percent, paced by a 1.6 percent gain in Elpida Memory Inc. after Kyodo news reported the computer-memory chipmaker is in talks with Powerchip Technology Corp. and other Taiwan companies on business tie-up including mergers and capital alliances.

‘Limited’ Impact

The Shanghai Composite Index, which is Asia’s worst performer this year with a 13 percent drop, fell 1.8 percent, reversing an earlier rally of as much as 1.5 percent. PetroChina Co., the nation’s largest oil producer, fell 2.2 percent.

“The risk is that Beijing has delayed normalizing policy too long and will need to hike more aggressively than we forecast over 2011, with a bigger impact on growth,” Brian Jackson, a senior strategist at Royal Bank of Canada in Hong Kong, wrote in a note today. “The latest rate hike should alleviate this risk to some extent.”

The increase took China’s benchmark lending rate to 5.81 percent, compared with 7.47 percent before cuts from late 2008 to counter the global financial crisis. It will climb to 6.56 percent by the end of next year, according to the median forecast in a Bloomberg News survey of economists this month.

The deposit rate increased to 2.75 percent, compared with the 5.1 percent annual pace of inflation in November.

Swaps, Bonds

China’s interest-rate swaps climbed, with 10-year swaps, the fixed rate needed to receive the floating seven-day repo rate, gaining 10 basis points to 4.21 percent, according to data compiled by Bloomberg. That was the biggest increase since Nov. 26. Government bonds fell, sending the yield on the 3.77 percent note due December 2020 higher by seven basis points to 3.88 percent, according to the China Interbank Bond Market.

Copper erased losses of as much as 1.3 percent after the rate increase spurred expectations the government may refrain from further tightening measures in the short term. Futures also advanced 0.5 percent to 69,270 yuan（$10,453） a metric ton in Shanghai trading.

“Following the two interest-rate hikes and three reserve requirement ratio hikes in the past two months, we may not see further tightening moves at least in the next couple of weeks,” said Zeng Chao, an analyst at Everbright Futures Co.

Oil, Treasuries

Crude for February delivery erased losses of as much as 0.8 percent to trade at $91.71 on the New York Mercantile Exchange. Futures jumped 4 percent last week and reached $91.63, the highest since Oct. 8, 2008. Nymex floor trading was closed Dec. 24 for the Christmas holiday.

Treasuries are on course for a 2.4 percent loss this month, the most since December 2009, according to Bank of America Merrill Lynch indexes. Yields for the 2.625 percent security maturing in November 2020 climbing to the highest since Dec. 17, as the U.S. prepares to sell $99 billion of debt amid signs the economy is improving.

The Conference Board’s U.S. consumer confidence index increased to 56.4 this month from 54.1 in November, according to the median estimate of economists surveyed by Bloomberg News before the data tomorrow. The dollar was at $1.3129 per euro from $1.3122 last week and fetched 82.80 yen from 82.88. The greenback touched $1.3055 on Dec. 23, the highest since Dec. 1.