BLBG: European Stocks Rise as Krone Jumps With Franc
European stocks rose, led by chemical makers, and Norway’s krone rallied with Switzerland’s franc following central bank policy decisions. Asian currencies fell with commodities after the Federal Reserve raised estimates for interest rates and Chinese home prices declined.
The Stoxx Europe 600 Index gained 0.7 percent at 10:24 a.m. London time. Norway’s krone jumped 1.3 percent versus the dollar and the franc added 0.4 percent, while the pound also strengthened as Scots went to the polls for a referendum on independence. The South Korean won led a decline in Asian currencies and equities in the region also fell. Copper dropped 0.3 percent. Standard & Poor’s 500 Index futures climbed 0.2 percent and Treasuries rose for the first time in three days.
Central banks in Switzerland and Norway kept policy unchanged today after the Fed retained a pledge to hold down interest rates and said officials increased by 25 basis points their median estimate for the federal funds rate by the end of 2015. Chinese policy makers cut the rate on repurchase agreements after new home prices fell in 68 of 70 Chinese cities in August from a month earlier. Spain and France sold bonds at record-low yields as the European Central Bank allotted 82.6 billion euros ($106.4 billion) of targeted long-term loans to banks.
“We’re creeping forward to the time when rates go up,” said Neil Mellor, a currency strategist at Bank of New York Mellon in London. “There’s this necessary trade-off taking place, keeping the idea that we’re moving to a time where rates go higher but at the same time the Fed is playing down people’s fears.”
Stocks Advance
The Stoxx 600 rose for a second day after yesterday’s 0.5 percent increase. Bayer AG led chemicals companies higher after saying it will spin off its plastics unit, jumping 5 percent. Swiss pumpmaker Sulzer AG advanced 8.4 percent after saying it’s considering expanding its energy industry equipment business through a potential merger with Dresser-Rand Group Inc.
Deutsche Lufthansa AG dropped 0.7 percent after HSBC Holdings Plc lowered its rating on the airline, while Telefonica Deutschland Holding AG slid 2.1 percent after a Goldman Sachs Group Inc. downgrade.
The krone surged at least 0.7 percent versus all of its 31 major counterparts as the central bank kept its benchmark rate unchanged and said it will start raising rates after 2015. It rallied to 6.3654 per dollar and gained 1.2 percent to 8.2011 per euro.
Scots Vote
Switzerland’s franc climbed as the nation’s central bank kept its interest-rate target range at 0 to 0.25 percent at its policy review today, as forecast by all but one of 20 economists surveyed by Bloomberg. The currency appreciated to 93.80 centimes against the dollar and strengthened 0.2 percent to 1.20836 per euro.
The pound advanced 0.2 percent to $1.6309. Most polls yesterday showed the anti-independence Better Together group backed by Prime Minister David Cameron and the main U.K. parties leading the “yes” campaign. The FTSE 100 Index of shares gained 0.5 percent. Yields on 10-year gilts rose four basis points to 2.55 percent.
Futures (SPX) on the S&P 500 expiring in December advanced after the index increased 0.1 percent yesterday, closing 0.3 percent away from its record. The U.S. 10-year yield fell two basis points to 2.60 percent.
The Fed tapered monthly bond buying by $10 billion for a seventh time, staying on course to end the program as soon as next month. The federal funds rate will be at 3.75 percent at the end of 2017, the central bank said.
U.S. inflation is still below the Fed target, Chair Janet Yellen said after the meeting of officials. The central bank retained its pledge to hold interest rates near zero for a “considerable time” after asset purchases end. That’s not a form of calendar-based guidance, Yellen told reporters.
Emerging Markets
Malaysia’s ringgit fell to a four-month low of 3.2439 per dollar before the central bank announces its decision on rates. South Korea’s won dropped as much as 0.8 percent to 1,043.32, the weakest since April 16.
The MSCI Emerging Markets Index slid 0.4 percent, with Turkey’s benchmark gauge dropping 1.4 percent and Korea’s Kospi losing 0.7 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong retreated 0.9 percent, after rallying the most in two weeks yesterday. The Shanghai Composite Index added 0.4 percent.
China’s home prices declined in cities including Beijing and Shanghai, the National Bureau of Statistics said in a statement today. The People’s Bank of China sold 10 billion yuan ($1.6 billion) of 14-day contracts at 3.5 percent today, according to its website. That’s down from 3.7 percent at a Sept. 16 auction.
India-China
The S&P BSE Sensex advanced for a second day, climbing 1.7 percent, the most in two months, on optimism trade ties with China will attract foreign inflows to India. Prime Minister Narendra Modi will host Chinese President Xi Jinping for talks in New Delhi after the two leaders witnessed the signing of more than $3.4 billion in agreements yesterday.
The Bloomberg Commodity Index (BCOM) declined 0.4 percent. Copper retreated for the first time in three days to $6,909 a metric ton and aluminum dropped for a second day to $1,995 a ton. West Texas Intermediate oil fell 0.2 percent to $94.23 a barrel after crude inventories in the U.S. rose for the first time in five weeks. China is the biggest buyer of energy and industrial metals.
In the U.S., a report at 8:30 a.m. in Washington may show initial jobless claims fell to 305,000 in the week ended Sept. 13 from 315,000 in the previous period, according to a Bloomberg News survey of economists. Housing starts probably fell in August, another release may show.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net
To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net Paul Dobson
