BS: Europe Stocks Follow China Higher on Stimulus; Oil Slides
European stocks and U.S. equity-index futures followed Chinese shares higher amid speculation the country’s central bank will add stimulus. Oil resumed declines as commodity volatility hit a two-year high, while U.K. bonds retreated.
The Stoxx Europe 600 Index advanced 0.5 percent by 8:20 a.m. in London, while Standard & Poor’s 500 index futures advanced 0.2 percent. The Shanghai Composite Index surged 3.1 percent and a gauge of mainland companies listed in Hong Kong added 2.8 percent. West Texas Intermediate crude retreated 0.8 percent after yesterday’s 4.3 percent surge and the Bloomberg Commodity Index (BCOM) slipped 0.7 percent. The yield on 10-year U.K. gilts climbed three basis points.
The People’s Bank of China, which reduced interest rates on Nov. 21, refrained today from draining funds from the financial system, fueling speculation it may be preparing to cut banks’ reserve ratio requirements. Bloomberg’s global commodity gauge, which rebounded off a five-year low yesterday, is swinging the most since October 2012, according to a 60-day measure of historic volatility. Australia and India held rates steady before the euro region reviews monetary policy later this week.
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“In the grand scheme of things, central banks are continuing with stimulus, so money is flowing into stocks and is supporting the bottom,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 39 trillion yen ($328 billion) in assets. “While there are many concerns out there, excess liquidity will support the market. The fall in oil prices is positive for some countries like the U.S. and Japan, but can also be negative for emerging markets, which in turn could cause exports to decline and drag down the global economy.”
Aviva Deal
Shares of energy producers led gains among the 19 industry groups on the Stoxx 600. Tullow Oil Plc climbed 5.3 percent and Cairn Energy Plc advanced 2.6 percent.
Aviva Plc added 0.4 percent after Britain’s second-largest insurer by market value, agreed to buy Friends Life Group Ltd. for about 5.6 billion pounds ($8.8 billion) in stock in the U.K. insurance industry’s biggest takeover in 15 years. Friends Life increased 2 percent.
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The MSCI Asia Pacific Index (MXAP) climbed for the first time in four days. BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 3.9 percent and was the biggest support for a subindex of mining stocks.
Hong Kong-listed Chinese brokerages surged, with China Galaxy Securities Co. jumping 9.9 percent and Citic Securities Co. climbing 7.2 percent.
‘Bull Market’
“It looks like the market has reached consensus that it’s a bull market and fresh capital is flowing in,” Dai Ming, a fund manager at Hengsheng Asset Management Co. in Shanghai, said by phone today. “Brokerages are the biggest beneficiaries because of surging trading values. The possible window for a reserve-requirement ratio cut could be the end of the year or early next year.”
Hong Kong’s Hang Seng Index (HSI) added 1.2 percent after slumping 2.6 percent yesterday, while a gauge of Chinese shares in the city advanced following a 2.9 percent rout yesterday. The Shanghai Composite Index capped its biggest one-day jump since September last year and the highest close since July 2011.
U.S. equity-index futures climbed after the S&P 500 slipped 0.7 percent yesterday. Online shopping rose 8.1 percent on Cyber Monday, slowing from last year as consumers spread their online purchases over more days. Shopping on smartphones and tablets accounted for about 20 percent of e-commerce sales, up from a total of 17 percent the previous year, according to IBM.
IMF Forecast
Prices for materials and energy have been plunging, fueling deflation concerns, on concern that supply is outstripping demand as estimates for global growth are downgraded.
The drop in oil prices will provide a net boost to the global economy while posing risks for energy-producing nations including Russia, International Monetary Fund Managing Director Christine Lagarde said. The IMF, citing rising geopolitical tension and lower volatility, in October cut its forecast for global growth in 2014 to 3.3 percent and to 3.8 percent next year.
WTI for January delivery dropped to $68.37 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose to $69 yesterday, retracing a loss of as much as 3.7 percent. Prices have decreased 30 percent this year.
Brent for January settlement was 0.6 percent lower at $72.11 a barrel on the London-based ICE Futures Europe exchange. Oil has collapsed into a bear market amid the fastest rate of U.S. production in more than three decades.
Ruble Rallies
Norway’s krone, the worst performing major currency versus the dollar this quarter, retreated 0.6 percent and the yen weakened 0.4 percent. The Bloomberg Dollar Spot Index, added 0.2 percent after falling 0.3 percent yesterday, the most in three weeks. The euro slipped 0.2 percent.
The ruble climbed to 50.87 per dollar, snapping a five-day, 14 percent plunge that was the biggest such retreat since at least 2003.
South Korea’s won strengthened to 1,106.75 per dollar, according to prices compiled by Bloomberg. The currency fell to 1,119.95 yesterday, the lowest level since August 2013.
Gold for immediate delivery declined 0.7 percent to $1,203.73 an ounce. The metal rallied 3.8 percent yesterday to $1,221.43, the highest level since Oct. 30. Silver and platinum dropped at least 1.3 percent, while palladium retreated 0.6 percent.
Copper for three-month delivery slipped 1 percent in London to $6,381 a ton, while aluminum retreated 0.9 percent.
To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net
To contact the editors responsible for this story: Nick Gentle at ngentle2@bloomberg.net Andrew Monahan
