BLBG:Stocks, Euro Advance As ECB Meets; Spain Bonds, Gold Rise
Stocks rose and the euro approached a two-month high while Spanish and Italian 10-year bonds extended a rally that drove yields down every day this week as the European Central Bank left rates unchanged and investors awaited details of its plan to ease the debt crisis.
The MSCI All-Country World Index added 0.3 percent at 7:45 a.m. in New York. Standard & Poor’s 500 Index futures rose 0.5 percent. The euro strengthened 0.3 percent to $1.2635. Sweden’s krona weakened against most of its major peers after its central bank cut rates. Italy’s 10-year yields fell five basis points to 5.46 percent and the rate on similar-maturity Spanish debt lost 18 basis points to 6.23 percent. The cost of insuring European corporate debt using credit-default swaps slid for a fifth day. Gold advanced 1 percent to $1,709 an ounce.
ECB President Mario Draghi favors unlimited purchases of government debt that will be sterilized to assuage concerns about printing money, two central bank officials briefed on the plan said before Draghi speaks at a press briefing today. The ECB left its benchmark rate at 0.75 percent today. Growth in U.S. service industries probably eased in August and companies took on the fewest workers in three months, economists said before reports today that precede payrolls data tomorrow.
“It is one of the most important days this year, a potential game changer for the European debt crisis,” said Bernd Berg, a currency strategist at Credit Suisse Group AG’s private banking unit in Zurich. “The euro is trading higher into the meeting as expectations are high.”
Lonmin Accord
The Stoxx Europe 600 Index (SXXP) advanced 0.6 percent as all 19 industry groups gained. Lonmin Plc, the platinum producer whose main mine has been shut for a month because of a violent strike that led to 44 deaths, jumped 5.5 percent after it signed an accord to open wage talks with three unions. Luxottica SpA (LUX), the world’s biggest maker of eyeglasses, sank 6.8 percent as Chairman Leonardo Del Vecchio sold a stake.
The gain in S&P 500 futures indicated the gauge will rise for the first day this week. The Institute for Supply Management’s non-manufacturing index, which covers about 90 percent of the economy, is projected at 52.5 last month following July’s 52.6 reading, according to the median forecast of 76 economists in a Bloomberg survey. A reading greater than 50 signals expansion.
Sweden’s krona weakened 0.1 percent against the euro after the Riksbank cut interest rates by 0.25 percentage points to 1.25 percent.
Spain Auction
Spanish two-year notes declined after demand fell at the government’s sale of 3.5 billion euros ($4.4 billion) of debt. The nation sold the notes maturing in 2014 at an average yield of 2.798 percent, compared with 4.706 percent when they were sold in June. Investors bid for 2.01 times the number of securities allotted, down from 3.97 times at the June auction. Demand also declined at the sales of 2015 and 2016 notes. The two-year note yields added seven basis points to 3.17 percent.
German 10-year bunds fell for a fifth day, with the yield rising two basis points to 1.50 percent. Treasury 10-year yields increased two basis points to 1.61 percent.
“The markets are hoping there will be a bond plan and that Draghi has a large majority for this,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “Market sentiment is good because of the hopes that the ECB will intervene at the short-end.”
The Markit iTraxx Crossover Index of credit-default swaps tied to 50 mostly junk-rated companies fell two basis points to 556, the lowest since March 19. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments dropped four basis points to 215, the lowest since March.
Gold Forecast
The Standard & Poor’s GSCI gauge of 24 commodities advanced 0.8 percent, with silver up 2.1 percent and New York oil gaining 1.2 percent to $96.49 a barrel. Gold will be at $1,840 an ounce by the end of the year, Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc., said in a Bloomberg Television interview. The bank is “modestly bullish” on commodities, he said.
The MSCI Emerging Markets Index (MXEF) added 0.4 percent. The Shanghai Composite Index (SHCOMP) added 0.7 percent as railway companies rallied after a government agency approved subway plans for 18 cities. Russia’s Micex jumped 1.3 percent and India’s Sensex climbed 0.2 percent. Benchmark gauges in South Africa, Poland, Hungary and Thailand gained at least 0.8 percent. Malaysia’s equity index sank 1.4 percent amid concern loan growth will slow and as palm oil prices declined.
To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net;
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net
