BLBG: European Stocks Rise for a Fifth Day as Commodities Drop
European stocks and Treasuries rose for a fifth day on optimism policy makers from the U.S. to Japan will maintain stimulus. Metals led commodities lower, while shares in China dropped on concern the government may tolerate slower growth.
The Stoxx Europe 600 Index gained 0.5 percent to 298.13 at 11:28 a.m. in London, posting its longest winning streak since April. Standard & Poor’s 500 Index (SPA) futures added 0.1 percent after the equity benchmark jumped to a record yesterday. Yields on 10-year U.S. debt headed for their biggest weekly decline in 13 months. The euro fell against most of its major peers. The Shanghai Composite Index retreated 1.6 percent. Copper dropped 0.7 percent. Corporate credit risk slipped for a third week in Europe, its biggest decline in 10 weeks.
European Central Bank executive board member Vitor Constancio said that the euro area’s slow economic recovery “implies that monetary policy has to stay accommodative for a longer period of time.” The U.S. Federal Reserve and the Bank of Japan both indicated this week they will maintain monetary stimulus. China’s finance minister said growth of 6.5 percent wouldn’t be a “big problem.”
“Central banks are giving a clear indication that stimulus will remain,” said Piet Lammens, head of research at KBC Bank NV in Brussels. “Policy will remain accommodative for a very long time and that is positive for bonds.”
U.S. Earnings
More than two stocks climbed for every one that dropped on the Stoxx 600 (SXXP). A gauge of technology shares posted the biggest gain on the equity benchmark as Invensys Plc surged 15 percent. The British maker of industrial software and control systems received a 3.3 billion-pound ($5 billion) offer from Schneider Electric SA. The French maker of low- and medium-voltage equipment retreated 4 percent.
Cap Gemini SA advanced 2 percent after Infosys Ltd., India’s second-largest software exporter, forecast sales that beat analysts’ estimates.
The S&P 500 climbed to a record yesterday amid optimism about the second-quarter earnings season. JPMorgan Chase & Co. and Wells Fargo & Co. release their results today.
The U.S. equity benchmark rose for a sixth day yesterday, its longest rally since March. Fed Chairman Ben S. Bernanke said on July 10 that “highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.” The measure has recouped all of a 5.8 percent slide from May 21 to June 24 triggered after Bernanke told Congress that the Fed may taper bond purchases if the economy continues to improve in line with the central bank’s forecasts.
Asian Equities
About three stocks rose for every two that fell on the MSCI Asia Pacific Index, which climbed less than 0.1 percent today and 3 percent this week. The Hang Seng China Enterprises Index dropped 1.2 percent after its biggest one-day advance since January yesterday.
The MSCI Emerging Markets Index (MXEF) was little changed, leaving the gauge 2.8 percent higher this week. Russia’s Micex Index added 1.3 percent, its highest level since May, as Bank Rossii left the country’s benchmark interest rates unchanged. The central bank met for the first time with Elvira Nabiullina as chairman. India’s Sensex advanced 1.5 percent, led by Infosys.
China’s Finance Minister, Lou Jiwei, speaking yesterday at the U.S.-China Strategic and Economic Dialogue in Washington, said he remains confident of achieving a 7 percent growth rate this year. That’s lower than the government’s target for 2013 of 7.5 percent. A report due on July 15 may show economic growth slowed for a second quarter in the three months to March.
Treasury Yields
Ten-year Treasury yields fell four basis points, or 0.04 percentage points, to 2.53 percent. They have dropped 21 basis points this week, heading for their biggest decline since the week ended June 1, 2012.
Fed Bank of St. Louis President James Bullard, who has advocated increasing asset purchases if inflation slows, will speak at Jackson Hole, Wyoming today.
Germany’s 10-year bund yield slipped five basis points to 1.57 percent and Spain’s fell three basis points to 4.79 percent. Ireland’s yields declined 15 basis points to 3.82 percent as Standard & Poor’s raised the outlook for the nation’s debt rating to positive from stable. Portugal’s 10-year yield rose 11 basis points to 7.01 percent.
The euro weakened 0.3 percent to $1.3052. The Bloomberg Dollar Index advanced 0.3 percent, paring its drop this week to 1.6 percent. Asian currencies headed for their biggest weekly gain in 10 months, with the Bloomberg-JPMorgan Asia Dollar Index (ADXY) rising 0.5 percent.
Credit Swaps
The cost of insuring against losses on corporate bonds dropped. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies headed for a drop of 8.4 basis points this week to 105.4, the biggest decrease since the week ended May 3 and the lowest level since June 7. The gauge was little changed today.
The index typically falls as investor confidence improves and rises as it deteriorates. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
The S&P GSCI gauge of 24 commodities declined 0.2 percent, paring its third weekly advance. Copper fell to $6,948.50 a metric ton. China is the largest buyer of the metal. West Texas Intermediate oil fell 0.3 percent to $104.64 a barrel. Oil trading in New York was about a fifth lower than the average of the past 100 days, according to data compiled by Bloomberg.
Silver for immediate delivery dropped 1.6 percent to $19.848 an ounce, paring its gain this week to 4.9 percent. Gold retreated 0.7 percent to $1,277.25 per ounce. Lead decreased 0.5 percent to $2,068.75 a metric ton on the London Metal Exchange.
To contact the reporter on this story: Will Hadfield in London at whadfield@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
