BLBG: European Stocks Rise as Rand Gains; Gold Drops With Gilts
European stocks extended this week’s gain as Shire Plc led drugmakers higher amid an increase in merger activity. South Africa’s rand strengthened as record-low currency volatility boosted demand for higher-yielding assets, while U.K. bonds and gold dropped.
The Stoxx Europe 600 Index added 0.2 percent at 7 a.m. in New York. Shire surged 11 percent. Standard & Poor’s 500 Index futures were little changed while emerging-market shares were poised for their first weekly drop this month on concern higher oil costs will curb growth. The rand gained 0.6 percent against the dollar and the yield on 10-year gilts approached a three-month high. Gold slid from the highest price since April.
The S&P 500 closed at a record yesterday and European stocks approached a six-year high after the Federal Reserve said this week U.S. interest rates will remain low. Overnight borrowing costs for euro-area banks fell to a record-low 0.01 percent and volatility declined from currencies to stocks to bonds. Commodities led by oil headed for a second weekly gain as President Barack Obama said he’s sending U.S. military advisers to assist the Iraqi army battle an insurgency and is prepared to take more action.
“We’re still overweight global equities,” said Kelvin Tay, chief investment officer for South Asia Pacific at UBS Wealth Management. “Where risk assets are concerned, you tend to benefit from low interest rates and from the Fed’s statement, we don’t think that interest rates are going to go up anytime soon. There is some concern that the situation in Iraq could escalate and bring oil prices up another notch.”
Health-care companies led gains by European equities today. AbbVie Inc. said that Shire turned down a bid of as much as 27.3 billion pounds ($46.6 billion).
TSB Climbs
TSB Banking Group Plc rallied 13 percent on its first day of trading. Lloyds Banking Group Plc sold a 35 percent stake in the lender, more than the 25 percent it had planned, because of strong demand from investors. Euronext NV (ENX) slipped 1 percent after Intercontinental Exchange Inc. offloaded the operator of stock markets in France, the Netherlands and Belgium.
The Stoxx 600 gained 0.5 percent this week and the S&P 500 has climbed 1.2 percent.
The MSCI Emerging Markets Index slid 0.3 percent, bringing this week’s loss to 0.3 percent. South Korea’s Kospi slipped 1.2 percent to the lowest close since May 12 and the biggest decline in almost two months. Benchmark gauges in India, Turkey and Taiwan declined at least 0.4 percent.
Tape Scandal
Poland’s zloty weakened 0.3 percent against the euro, extending its biggest weekly drop in three months, as concern deepened that leaked recordings of conversations between a government minister and the central bank chief may trigger early elections.
The Shanghai Composite Index gained for the first time in four days, rising 0.2 percent. The gauge has dropped 2.1 percent this week, the biggest decline for the period in two months, as at least five companies marketed shares to investors and data showed the nation’s home prices declined for the first time in almost two years.
Gilts fell as Barclays Plc brought forward its forecast for the first increase in Bank of England interest rates to this year from the second quarter of 2015. The 10-year yield increased three basis points to 2.76 percent, after reaching 2.79 percent on June 13, the highest since March 11.
German 10-year yields increased two basis points to 1.34 percent. Italy’s rose two basis points to 2.93 percent as the nation prepared a debt-exchange auction.
Carry Trades
The rand strengthened to 10.6788 per dollar. JPMorgan Chase & Co.’s Global FX Volatility Index was at 5.51 percent today, matching the least on record.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 counterparts, slipped to 1,009.98, set for its lowest close since May 21.
Gold dropped 0.7 percent to $1,311.16 an ounce in London trading after earlier climbing to $1,322.12, the highest level since April 15. The metal is heading for a third weekly increase.
Brent crude, 0.2 percent lower today at $114.82 a barrel, was still set for a second weekly gain.
U.K. natural gas futures slipped for a fourth session.
Zinc for three-month delivery on the London Metal Exchange climbed for a sixth day, adding as much as 1 percent to $2,175 a metric ton, the highest level since February 2013, as shrinking stockpiles raised concern that supplies may trail demand. Copper rose 0.8 percent to $6,776.25 a ton.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net Stephen Kirkland
