BLBG: Stocks Gain While Bonds Fluctuate as Global Tensions Ease
Global stocks rose, with the Standard & Poor’s 500 Index extending the biggest gain in five months, while bonds fluctuated as tension eased in Ukraine and the U.S. showed signs of pushing back militants in Iraq. The euro slid.
The MSCI All-Country World Index advanced 0.7 percent at 9:32 a.m. in New York. The S&P 500 added 0.3 percent, after rebounding 1.2 percent on Aug. 8. The Stoxx Europe 600 Index rallied 1.3 percent and the MSCI Emerging Markets Index jumped 1.3 percent. The U.S. two-year note yield was little changed at 0.44 percent after falling to an eight-week low on Aug. 8. German and U.K. bonds ended a three-day advance. The euro retreated against all of but one of its 16 major peers. Brent crude fell 0.2 percent and copper climbed 0.4 percent.
U.S. equities rallied on Aug. 8 after Russia said warplanes ended drills near Ukraine. Israel and militants in the Gaza Strip agreed to an Egyptian-brokered truce. Using fighter jets and drones, the U.S. destroyed several armed trucks and a mortar position held by Iraqi militants, the U.S. Central Command in Tampa, Florida, said yesterday.
“The ending of Russian military exercises near Ukraine is contributing to a rally in global equities,” said Alvin T. Tan, the director of foreign-exchange strategy at Societe Generale SA in London. “The drop in short-term interest rates in the U.S. recently has been supporting global risk sentiment and specifically U.S. equity markets. If Iraq militants can be forced back, that is also a good thing.”
Global Conflicts
The S&P 500 had fallen 3.9 percent from its record of 1,987.98 on July 24 on concern that conflicts from Iraq to Israel and Ukraine could slow global economic growth. The index on Aug. 7 came within 60 points of wiping out its gains for 2014 and closed below its 100-day moving average for the first time since April before rallying the following day.
The equities benchmark has gone without a 10 percent correction since 2011. It trades at 17.5 times the reported earnings of its companies, after reaching a four-year high of 18.3 in June.
MannKind Corp. surged 21 percent after Sanofi agreed to pay the drugmaker as much as $925 million for rights to the world’s only available inhaled insulin. Kinder Morgan Inc. rallied 16 percent after announcing plans to consolidate its energy businesses. Priceline Group Inc. fell 0.5 percent after forecasting third-quarter earnings below analyst estimates.
About 9 stocks climbed for every one that dropped on the Stoxx 600. Banco Popolare SC rose 7.8 percent after the Italian lender unexpectedly reported a second-quarter profit. The bank lowered its operating costs by reducing its spending on staff and administration. Balfour Beatty Plc gained 2.6 percent after the British construction company rejected a revised merger proposal from Carillion Plc.
Emerging Markets
Emerging markets rebounded from a six-week low as benchmark gauges from China and the Philippines to Russia, Poland and South Africa advanced more than 1 percent. Chinese inflation held below the government’s goal in July, data showed over the weekend.
Russia’s Micex Index jumped 1.8 percent as OAO Sberbank and VTB Group climbed more than 3.7 percent. MSCI Inc. said it kept the country’s biggest banks in its Russia gauge after the U.S. and European Union imposed sanctions blocking the purchase of new bonds or stocks issued by the lenders.
Turkish stocks retreated after Prime Minister Recep Tayyip Erdogan won the country’s first direct presidential election, with 51.8 percent of the vote and enough to avoid a run-off, according to preliminary results show. The Borsa Istanbul 100 index of shares fell 1.7 percent.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong advanced 1.9 percent, the most since July 23. The Shanghai Composite Index added 1.4 percent. The consumer price index rose 2.3 percent from a year earlier, the National Bureau of Statistics said, the same pace as in June and also the median estimate in a Bloomberg News survey.
South Africa
South Africa’s All-Share Index (JALSH) climbed 1.5 percent, the most since Dec. 27. African Bank Investments Ltd. got emergency support from South Africa’s central bank in a plan calling for the company to raise 10 billion rand ($938 million) in capital and break off a so-called bad bank for soured loans.
Germany’s 10-year bund yield, Europe’s benchmark, was little changed at 1.05 percent after falling to a record-low 1.023 percent last week. The rate on similar-maturity U.K. gilts increased two basis points to 2.48 percent. The 10-year Treasury note yield was little changed at 2.42 percent.
The euro declined 0.1 percent to $1.3386 before reports this week that analysts said will show the pace of growth slowed in the second quarter and inflation in the 18-nation currency bloc remained less than half the European Central Bank’s goal.
Norwegian’s krone rallied 1.2 percent to its strongest level in more than seven weeks against the euro after a report showed inflation in the Nordic nation exceeded economist forecasts.
Brent crude fell 0.2 percent, trading near its lowest level in nine months, amid speculation that U.S. air strikes in Iraq diminished the threat to oil supplies posed by insurgents. West Texas Intermediate rose 0.2 percent.
Copper futures climbed 0.4 percent and aluminum advanced 0.5 percent. China is the biggest buyer of industrial metals.
To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net; Nick Gentle in Hong Kong at ngentle2@bloomberg.net
To contact the editors responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net Jeff Sutherland, Claudia Carpenter
