BEFORE THE BELL: US Stock Futures Higher On China Yuan News

21st Jun 2010 13:23

By Steve Goldstein U.S. stock futures, Chinese airlines and natural resource companies led a global advance in equities and commodities markets Monday after China said it would lift the lid on its tightly-controlled currency, spurring expectations for growth in the world's third largest economy. Futures on the Dow Jones Industrial Average rose 116 points. S&P 500 futures climbed 14.8 points to 1125 and Nasdaq 100 futures rose 22.50 points to 1932. The gains came as China announced said it would allow its currency, the yuan, to move, albeit in a gradual manner. Unlike a revaluation in the 2005, however, China did not make any one-time adjustment to its currency. "China's move toward currency flexibility will be taken as a vote of confidence in the global recovery and in the stability of international financial markets, which is a boost for market confidence," said Lena Komileva, head of G7 market economics at Tullett Prebon. "A more flexible exchange rate will also reduce investor expectations of more aggressive Chinese monetary tightening, providing support for domestic assets." The dollar fell to 6.7901 yuan from 6.8207 yuan, according to FactSet data. Several other assets climbed on the move. Asian equities were strong, with the Shanghai Composite up 2.9% and the Hang Seng rising 3%. Chinese airlines were particular beneficiaries since planes and jet fuel are priced in dollars, lifting shares of companies including China Southern Airlines Co. (ZNH). In Europe, metals producers including Rio Tinto (RTP) PLC jumped sharply, lifting the Stoxx Europe 600 index 1.3% in mid-morning trade. Metals futures also climbed, with copper futures up nearly 4%. Oil futures rose over $1 a barrel. Bonds fell, with yields on the 10-year Treasury falling 6 basis points to 3.28%. If Chinese exporters are hurt by the move, they will receive fewer U.S. dollars, meaning the Chinese government will have smaller reserves to buy U.S. government bonds. The dollar index slipped 0.4%. Outside of the China move, BP PLC (BP, BP.LN) dropped in London and in pre-open trade as the oil giant said costs of cleaning up the oil spill reached $2 billion, with reports saying it's looking to raise $50 billion through asset sales and borrowing. The drop also comes after a report showing an internal, worst-case scenario that the well would leak 100,000 barrels a day if a part is removed. Last week, the Dow Jones Industrial Average rose 239 points, or 2.35%, its second straight week with a gain of more than 2%. -By Steve Goldstein; 44 2078 429 424; [email protected] (END) Dow Jones Newswires June 21, 2010 08:23 ET (12:23 GMT)