MW: Europe Stocks, U.S. Futures Gain as Brent Falls
European stocks advanced, rebounding from a two-year low, and U.S. equity-index futures rose following a four-week slump. Brent oil sank as Libyan rebels swept into Tripoli, while the Swiss franc and yen weakened and gold climbed to a record.
The Stoxx Europe 600 Index added 1 percent at 6:05 a.m. in New York, reversing an earlier drop of 0.9 percent. Standard & Poor’s 500 Index futures rose 0.9 percent after swinging between gains and losses of as much as 1 percent. Brent oil slipped 1.8 percent. The franc depreciated against 14 of its 16 major peers. The cost of insuring European government debt increased for the fifth day. Gold jumped 1.5 percent and silver climbed 2 percent.
The four-week rout in equities has wiped out more than $8 trillion in global stock values before central bankers from around the world prepare to meet in Jackson Hole, Wyoming. Record-low yields on U.S. Treasuries that show traders expect Federal Reserve Chairman Ben S. Bernanke to signal a third round of asset purchases. Libyan rebels captured two of Muammar Qaddafi’s sons in the battle to end his 42-year rule.
Equity markets are “bouncing along the bottom,” Mark Mobius, who oversees about $50 billion as executive chairman of Templeton Asset Management’s emerging markets group, said in an interview with Bloomberg Television. The Fed hasn’t given up supporting the economy by printing money and buying more Treasuries, he said.
Eni, Total
The Stoxx 600 fell on Aug. 19 to the lowest level since July 29, 2009. The gauge has plunged 18 percent in the past four weeks. Eni SpA, the Italian oil company that was the biggest foreign producer in Libya, gained 4.8 percent. Total SA, France’s largest oil company, climbed 3 percent in Paris.
The gain in S&P 500 futures indicated the gauge will rebound from a four-week losing streak. The index fell 1.5 percent to 1,123.53 on Aug. 19 and a closing level of 1,090.88 would bring the measure to a 20 percent decline since April 29, meeting the common definition of a bear market.
Stocks in the S&P 500 are moving in lockstep with each other by the most since at least 1990, a sign that the market’s biggest retreat in three years may not be over, according to MF Global Holdings Ltd. The average correlation coefficient between the 500 companies and the index was 0.8268 on Aug. 18, using 60 days of data, according to MF Global.
Bear Market Signal
High correlation “is usually the case in a bear market, when investors are liquidating equities as an asset class,” Craig Peskin, co-head of technical analysis at the New York- based firm, wrote in an e-mail on Aug. 18. “In a bull market, when investors are differentiating, we see low or falling correlation.”
The franc depreciated amid speculation policy makers will intervene to curb the currency’s gains. The Swiss Cabinet expects the SNB to set an exchange-rate target of at least 1.2 francs per euro, SonntagsZeitung reported, without saying where it got the information. The franc declined 0.3 percent against the euro and the dollar.
The yen declined against 15 of its 16 major counterparts after Finance Minister Yoshihiko Noda said he is ready to take decisive steps after the currency rose to its postwar record last week. The Japanese currency dropped 0.3 percent against the dollar, and 0.4 percent versus the euro.
Treasuries fell, pushing the 10-year yield up five basis points to 2.11 percent, before the government sells $99 billion of notes this week. The yield declined to a record low of 1.97 percent on Aug. 18. Treasury rates show traders expect Bernanke will signal as soon as this week that the central bank will begin a third round of so-called quantitative easing.
Euro-Area Bond
The Markit iTraxx SovX Western Europe Index of credit- default swaps linked to 15 governments increased seven basis points to 296, the highest in more than a week. German Chancellor Angela Merkel said euro-area common bonds are “the wrong answer,” fuelling speculation that her resistance will prolong the debt crisis. The yield on Greece’s 10-year bond rose 30 basis points to 16.94 percent and Portugal’s 10-year increased four basis points to 10.64 percent.
New York oil advanced 0.6 percent to $82.72 a barrel as Brent crude fell to $106.63 a barrel. Gold rose to a record $1,894.80 an ounce and silver climbed for a seventh day, the longest streak since April 22, to $43.725 an ounce.
The MSCI Emerging Markets Index dropped 0.5 percent, set for the lowest close in a year. South Korea’s Kospi Index sank 2 percent for the biggest retreat among equity indexes in major developing nations, while China’s Shanghai Composite Index slipped 0.7 percent. Poland’s WIG20 Index rallied 0.9 percent as Polskie Gornictwo Naftowe i Gazownictwo SA, a Warsaw-based oil and gas producer, climbed 3.6 percent.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
