* MSCI world equity index up 1.4 pct, at 5-week high
* Yuan hits 5-year high as China allows more flexibility
* Stocks, commodities up; dollar down vs basket
(Updates to U.S. markets, changes byline, changes dateline
from previous LONDON)
By Manuela Badawy and Natsuko Waki
NEW YORK/LONDON, June 21 (Reuters) - World stocks hit a
five-week high, while oil and other commodities jumped on
Monday after China made its exchange rate more flexible, easing
tensions with the West and boosting confidence in the global
economy.
Spot yuan <CNY=CFXA> climbed to its highest level against
the dollar since its last revaluation in July 2005 in a clear
signal that Beijing was sticking to its word that it would
allow greater currency flexibility. []
The euro was flat at $1.2384 per dollar after rising
earlier in the day on increased investor appetite for risky
assets, spurred by optimism that a global recovery would boost
China's buying power abroad.
U.S. stocks rose in late-morning trading as China's vow to
allow a flexible yuan invigorated optimism in the global
recovery and boosted the outlook for sales in the long term at
U.S. multinationals.
"It's totally on the back of China, and miners are the best
performers, which shows you where the drive in the markets is
coming from. We're also seeing generic higher appetite for
risk," said Joshua Raymond, market strategist at City Index in
London.
Energy and materials shares led the way up as commodities
advanced. Among U.S.-based multinational companies, Caterpillar
Inc <CAT.N> gained 2.4 percent to $67.48, while
Freeport-McMoRan Copper & Gold Inc <FCX.N> jumped 5.7 percent
to $69.69. For a factbox []
Coming just days before a Group of 20 summit in Toronto,
China's move is expected to boost purchasing power and demand
in the world's third largest economy.
A higher yuan would also help temper inflation in China by
pushing down import prices, which in turn could mean Beijing
would have less need to tighten monetary policy aggressively.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Full yuan coverage []
Unlocking the yuan http://china.thomsonreuters.com/yuan/
Graphic on yuan movements http://r.reuters.com/sut87k
Insider TV
-- Yuan to rise before G20
http://link.reuters.com/jes92m
-- Yuan NDFs overshoot http://link.reuters.com/jup72m
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The Dow Jones industrial average <> gained 93.64
points, or 0.90 percent, to 10,544.28. The Standard & Poor's
500 Index <.SPX> rose 8.33 points, or 0.75 percent, to
1,125.84. The Nasdaq Composite Index <> added 13.27
points, or 0.57 percent, to 2,323.07.
The MSCI world equity index <.MIWD00000PUS> rose 1.2
percent, hitting its highest level since mid-May.
The FTSEurofirst 300 index <> was up 0.7 percent,
rising for the ninth straight session to hit a 5-1/2 week peak,
with basic resources stocks being the biggest gainers.
Emerging stocks <.MSCIEF> added 2.8 percent to a six-week
high, while emerging sovereign debt spreads <11EMJ> tightened
13 basis points to 297 bps, their narrowest in five weeks.
"It's a very large positive in the sense that the next
decade of global growth is probably going to be shaped by how
well the China consumer develops or doesn't, and obviously this
is a step to help that," said Mike O'Rourke, chief market
strategist at BTIG LLC in New York.
U.S. crude oil <CLc1> rose 1.7 percent to $78.51 a barrel,
while spot gold <XAU=> hit a record high of $1,264.90 an ounce,
helped by the fall in the dollar <.DXY>, which lost about 0.1
percent against a basket of currencies.
Copper prices soared on China's pledge and raised hopes of
stronger demand growth from the world's largest consumer of
industrial metals. Benchmark lead <CMPB3> on the London Metal
Exchange touched $1,820 a tonne, its highest since June 1, and
tin <MSN> saw $18,250, matching the peak of May 28.
The euro rose to a one-month high near $1.2490 before
easing to $1.2391 <EUR=>, up 0.04 percent on the day.
Breaking the peg might mean China needs to buy less U.S.
dollars in intervention, which would leave it with fewer
dollars to buy U.S. Treasuries, but also give it less need to
diversify its holdings into currencies like the euro.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 21/32, with the yield at 3.3003 percent. The 2-year U.S.
Treasury note <US2YT=RR> fell 2/32, with the yield at 0.7459
percent. The 30-year U.S. Treasury bond <US30YT=RR> was off
42/32, with the yield at 4.2231 percent.
(Additional reporting by Leah Schnurr in New York and Brian
Gorman in London; editing by Jeffrey Benkoe)
