Shares drop from two-month high as easing expectations recede Loonie gains after Liberals win surprise majority in Canada European stocks fell for the first time in four days and the euro strengthened after lending data dented speculation that quantitative easing will be increased. Government bonds dropped. The Stoxx Europe 600 Index retreated from a two-month high after the European Central Bank said credit standards on business loans eased for a sixth straight quarter. The single currency gained as much as 0.5 percent, while yields on 10-year Italian bonds rose the most in two weeks. U.S. oil gained, as copper and zinc declined. The Canadian dollar rose after Justin Trudeau’s Liberal Party won a surprise majority in national elections to oust Prime Minister Stephen Harper’s government. “If the lending environment is on the mend, the chances of further QE drop out of the question,� said Neil Jones, London-based head of hedge-fund sales at Mizuho Bank Ltd. “There was some sense of potential further easing, in part aided by official comment. However, the market is moving away from this thinking.� The ECB said lending conditions largely improved in the third quarter, spurred by its asset-purchase program and tighter competition among banks. The improvements may weaken the case for an expansion in QE, when policy makers meet in Malta on Thursday, even as a stronger currency and emerging-market slowdown threaten the euro area’s recovery. Stocks The Stoxx 600 dropped 0.6 percent as of 7:55 a.m. in New York, led by declines for miners and energy companies. Standard & Poor’s 500 Index E-mini futures expiring in December declined 0.2 percent after the stock gauge ended little changed yesterday at a two-month high. Swatch Group AG and Cie. Financiere Richemont SA both fell about 2 percent after a report showed the biggest quarterly decline in Swiss watch exports since 2009. International Business Machines Corp. tumbled 4.9 percent in early trading after lowering its full-year profit forecast. Yum! Brands Inc. jumped 5.5 percent on plans to separate its battered China business from U.S. operations. SanDisk Corp. surged 8.3 percent as people familiar with the matter said the company is in advanced talks to sell itself to Western Digital Corp. Western Digital slipped about 3 percent in Germany. Harley-Davidson Inc. tumbled 7.2 percent after cutting its full-year motorcycle shipment forecast. Verizon Communications Inc. rose after reporting profit that surpassed analysts’ estimates. Chipotle Mexican Grill Inc. and Yahoo! Inc. are also among the 22 S&P 500 companies reporting earnings on Tuesday. Currencies The euro rose 0.5 percent to $1.1378, ending three days of declines. The single currency has gained almost 9 percent from a 12-year low of $1.0458 in March, when the ECB started implementing a QE program designed to revive inflation in the euro zone. The currency has advanced versus 15 of 16 major peers in the past three months. Canada’s loonie strengthened 0.3 percent to C$1.2984 to the dollar, reversing earlier losses. Trudeau campaigned against Harper’s budget-restraint agenda, claiming the nation needs a return to deficit spending to combat economic woes triggered by an oil-price collapse. The Australian dollar climbed 0.7 percent after minutes of the Reserve Bank of Australia’s October meeting showed policy makers determined rate cuts earlier this year were having an effect, supporting demand. Bonds European government bonds fell after the ECB lending data. Yields on 10-year French bonds rose five basis points to 0.98 percent, while those on German bunds added four basis points to 0.60 percent. There was a five basis-point increase in yields on 10-year Italian bonds to 1.64 percent. The yield on 10-year Treasury notes rose two basis points to 2.05 percent before Federal Reserve Bank of New York President William Dudley and Governor Jerome Powell speak at a conference. The bonds are near the cheapest in eight years, data compiled by Bloomberg showed, even as traders pare bets that the Fed will increase interest rates this year. They are on track for the first back-to-back monthly gain since January, according to Bloomberg World Bond Indexes. Commodities West Texas Intermediate rose 0.4 percent to $46.06 a barrel, after touching $46.30. U.S. inventories probably climbed by 3.5 million barrels last week, following an increase of 7.6 million in the prior period, according to a Bloomberg survey of analysts before an Energy Information Administration report Wednesday. Brent rose 0.1 percent to $48.68. U.S. natural gas futures rose 1.6 percent to $2.481 per million British thermal units, advancing for a second day on forecasts for unusually cold weather on the east coast that could boost demand for the heating fuel. Copper fell 0.3 percent to $5,189 in London, reversing a gain of as much as 0.7 percent. Nickel dropped 0.2 percent, aluminum fell 0.7 percent and zinc tumbled 1.1 percent. Gold rose for the first time in four days, climbing 0.4 percent to $1,175.66 an ounce, as signs of gains in U.S. housing revived speculation that the Federal Reserve may raise rates sooner rather than later. Housing starts increased in September, after falling in the previous two months, according to the median economist forecast. Emerging Markets The MSCI Emerging Markets Index dropped 0.2 percent from the highest since Aug. 11. The FTSE/JSE Africa All Share Index fell 1.2 percent amid speculation South African Finance Minister Nhlanhla Nene will abandon deficit-reduction targets during a mid-term budget on Wednesday due to mounting economic risks. The country’s growth outlook is “extremely fragile,� central bank Governor Lesetja Kganyago said on Tuesday. Turkey’s lira rose 0.6 percent against the dollar after party officials said the Islamic-rooted AK Party is weighing a possible coalition with the country’s biggest opposition party, the secular CHP, should next month’s election lead to another hung parliament.

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