June 20, 2010, 7:31 PM EDT
By Joanna Ossinger
June 21 (Bloomberg) -- U.S. stock-index futures advanced, indicating a third day of gains for the Standard & Poor’s 500 Index, after China’s plan to end its currency’s fixed rate to the dollar signaled confidence in the global economy.
Futures on the S&P 500 expiring in September rose 1.1 percent to 1,121.9 as of 8:23 a.m. in Tokyo. Dow Jones Industrial Average futures increased 99 points, or 1 percent, to 10,472, according to data compiled by Bloomberg. The U.S. dollar fell 0.4 percent against a basket of six major world currencies.
“Stock futures are rallying and the U.S. dollar is falling on the rationale that any China revaluation will boost Chinese demand for world exports as well as commodities,” said Ashraf Laidi, chief market strategist with CMC Markets in London, in an e-mail. “If a revaluation does take place, then this could well be the catalyst that may lift stocks near their April highs, barring any unpleasant revelations from Spanish interbank loans.”
The People’s Bank of China pledged on June 19 to make the yuan more flexible, while ruling out a one-time revaluation of the currency that’s been held at about 6.83 yuan per dollar since mid-2008. The global economy is “gradually recovering and the upturn in the Chinese economy has become more solid,” it said in a statement announcing the action.
Chinese Economic Growth
U.S. stocks completed their biggest two-week rally since November and the S&P 500 rallied 6.4 percent since June 7, including a 3 percent increase the day China said exports rose the most in six years. Investors are counting on the Asian economy, which expanded 11.9 percent in the first quarter, to help sustain worldwide growth after concern about Europe’s sovereign credit crisis sent the Dow Jones Industrial Average to its worst May retreat since 1940.
An appreciation of the yuan, also known as the renminbi, will benefit exporters and Chinese employment more than it hurts them, the central bank said in a statement. A more flexible currency would also help to curb consumer-price gains, asset bubbles and dependence on exports for growth, it said.
The S&P 500 gained 0.1 percent on Friday to 1,117.51. The Dow Jones Industrial Average advanced 16.47 points, or 0.2 percent, to 10,450.64. Both erased their 2010 losses last week and ended at one-month highs.
Walt Disney Co. shares may rise when U.S. exchanges open later today. The company’s “Toy Story 3” opened as the top movie at U.S. and Canadian theaters with $109 million in ticket sales, a record opening for its Pixar studio, according to Hollywood.com Box Office.
Goldman Sachs Group Inc. may be active after the U.S. Securities and Exchange Commission agreed to give the lender more time to file a response to the agency’s April 16 fraud lawsuit, two people with direct knowledge of the matter said.
--With assistance from John Liu in Beijing and Chua Kong Ho in Shanghai. Editor: Chris Nagi
To contact the reporter on this story: Joanna Ossinger at jossinger@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.
From Bloomberg Businessweek published on June 20, 2010, 7:31 PM EDT