BLBG: European Stocks Gain as S&P 500 Fluctuates Before Fed
European stocks rose with industrial metals while gold fell to the lowest level in almost six weeks before the Federal Reserve decides whether to slow $85 billion of monthly asset purchases. Oil and the pound advanced while U.S. stocks were little changed.
The Stoxx Europe 600 Index climbed 0.3 percent to 312.91 at 9:30 a.m. in New York. The Standard & Poor’s 500 Index (SPA) drifted between gains and losses after approaching a record yesterday. Copper and lead jumped more than 1 percent. West Texas Intermediate oil advanced 0.5 percent and bullion declined. Treasuries and the Bloomberg U.S. Dollar Index were little changed. Germany’s 10-year bund yield rose four basis points to 2 percent. The pound strengthened to an eight-month high versus the dollar.
Analysts are divided on the amount by which the Fed will scale back its monthly asset purchases. Among 64 economists surveyed by Bloomberg News, 33 predict it will reduce its buying of Treasuries by $5 billion or less, with 31 forecasting a cut of $10 billion or more. The Federal Open Market Committee concludes a two-day meeting today.
“The whole environment for growth does seem to have deteriorated slightly since June when the Fed last really spoke to the market,” Lucy MacDonald, chief investment officer for equities at Allianz Global Investors in London, which has the equivalent of about $419 billion under management worldwide, told Mark Barton on Bloomberg Television. “If they don’t do anything at all that may raise questions and people will be more concerned about growth. Clearly we need to have the comfort that the economic recovery is still well underpinned.”
Zodiac Aerospace
The Stoxx 600 rebounded from yesterday’s 0.5 percent decline. Zodiac Aerospace SA (ZC), the world’s largest maker of airline seats, rallied 4.4 percent in Paris trading after full-year sales increased and Bank of America Corp. upgraded its recommendation on the shares.
“Any sort of announcement, whether its zero tapering or $5 billion or $10 billion is going to have an effect on the market,” Nick Maroutsos, the managing director and co-founder of Kapstream Capital Ltd., which oversees about $5 billion, said by phone from Sydney. “What we do know is that it’s going to be a very, very gradual withdrawal of stimulus. We are bullish on equities.”
The S&P 500 closed at a six-week high yesterday, about five points from its Aug. 2 record. A Commerce Department report showed builders began work on fewer homes than projected in August and applications for future work declined more than forecast.
Housing Starts
Housing starts rose 0.9 percent to a 891,000 annual rate, following the prior month’s 883,000 pace that was weaker than previously estimated, the data showed. The median estimate of 83 economists surveyed by Bloomberg called for 917,000. Permits dropped 3.8 percent.
FedEx Corp., the world’s largest cargo airline, rallied in early trading after reporting earnings that beat analysts’ estimates.
The MSCI Emerging Markets Index slipped 0.4 percent, falling from a three-month high. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong decreased 0.7 percent while the Shanghai Composite Index added 0.3 percent. India’s S&P BSE Sensex jumped 0.8 percent and Russia’s Micex increased 0.2 percent. Malaysia’s ringgit strengthened 0.5 percent versus dollar.
WTI jumped 0.5 percent to $105.92 a barrel before U.S. government data that may show crude inventories shrank to the lowest level in more than a year. The Energy Information Administration is scheduled to release the report at 10:30 a.m. in Washington.
Libya Output
Gains may be limited as Libya is moving to restore its oil production. Libya, the holder of Africa’s largest oil reserves, is seeking to boost output to 700,000 barrels a day this week from as little as 200,000 barrels, according to state-owned National Oil Corp.
Gold for immediate delivery fell as much as 1.4 percent to $1,291.98 an ounce, the lowest since Aug. 8.
The yield on 10-year U.S. government securities rose 1.6 basis point to 2.86 percent. It’s down from a more-than-two-year high of 3.005 percent on Sept. 6. U.S. sovereign securities have fallen 1.1 percent since the end of June, versus a 0.4 percent drop for mortgage bonds, based on Bank of America Merrill Lynch indexes.
The pound gained as much as 0.5 percent to $1.5980 after minutes of the Bank of England’s last meeting showed policy makers voted unanimously to keep policy unchanged this month as an improving economic outlook prompted agreement that no more stimulus was needed. The 10-year gilt yield rose 7.5 basis points to 3.01 percent.
The dollar was up 0.1 percent at $1.3346 per euro and down 0.1 percent at 99 yen.
Spread Narrows
Spain’s 10-year bonds outperformed similar-maturity German debt, reducing the extra yield investors demand to hold the securities to as little as 2.39 percentage points, the least since July 2011.
The cost of insuring against losses on corporate bonds fell to the lowest in almost four months. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies decreased one basis point to 93 basis points, the least since May 23.
To contact the reporters on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
