Stocks rose, the euro strengthened and commodities gained for a third day as the European Central Bank meets today to decide on interest rates. Australia’s currency rallied after a report showed the economy grew at twice the rate economists estimated.
The MSCI All-Country World Index (MXWD) added 0.7 percent at 6:15 a.m. in New York. Standard & Poor’s 500 Index futures climbed 0.9 percent. The euro strengthened 0.4 percent to $1.2497. The Aussie rose 1.1 percent versus the dollar. The yield on the 10- year gilt increased 12 basis points as trading resumed following a two-day U.K. holiday. Germany’s 10-year bund yield jumped five basis points, while the cost of insuring Spanish government bonds against default fell from a record. The S&P GSCI gauge of 24 commodities gained 0.8 percent and oil advanced 1 percent.
While most economists predict the ECB will keep interest rates on hold, 12 of the 44 surveyed by Bloomberg forecast a cut. Spanish industrial output fell the most in more than two years in April and the euro-area economy stalled in the first quarter, reports showed today. More than $4 trillion has been erased from the value of global equities in the past month on concern a worsening debt crisis in Europe will stifle global growth.
“While expecting a policy change from the ECB this afternoon will be premature, there’s a growing sense policy makers are closing in on taking action on Spain,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen, where he helps oversee $55 billion. “The decline in stocks in recent weeks was so strong we had to see some sort of rebound, even without any materially good news out there yet.”
U.K. Banks
The Stoxx Europe 600 Index advanced 1.5 percent, its biggest rally in more than two weeks, as the U.K. market reopened after a two-day public holiday. HSBC Holdings Plc added 2.5 percent, contributing the most to the Stoxx 600 (SXXP)’s rebound as Sanford C. Bernstein & Co. said in a note that impairments are falling at Britain’s high-street banks. Barclays Plc jumped 5.2 percent, its biggest gain in five weeks, Lloyds Banking Group Plc increased 4.6 percent and Royal Bank of Scotland Group Plc rose 5.5 percent.
The gain in U.S. futures indicated the S&P 500 will rise for a third day. The Federal Reserve will release its Beige Book economic survey at 2 p.m. in Washington today. The 10-year U.S. Treasury yield advanced three basis points to 1.61 percent.
Yen Weakens
The euro jumped 0.7 percent versus the yen. The Japanese currency fell for the third day against the dollar, weakening 0.4 percent, as Finance Minister Jun Azumi indicated that Group- of-Seven nations remain supportive of intervention to address extreme currency moves. The Dollar Index (DXY) dropped 0.3 percent. The so-called Aussie appreciated against all its major counterparts after a report showed the nation’s economy expanded at more than twice the pace economists predicted.
The yield on Germany’s five-year note rose three basis points to 0.40 percent as the government sold 3.98 billion euros April 2017 securities. Portugal’s two-year yield dropped 55 basis points to 10.41 percent as borrowing costs declined at the sale of 1 billion euros of 12-month bills. The two-year gilt yield advanced three basis points to 0.28 percent.
Credit-default swaps on Spain fell 15.5 basis points to 588 after rising to an all-time high of 613.5 on June 1. The Markit iTraxx SovX Western Europe Index of contracts tied to 15 governments dropped 4.5 basis points to 321.5, tumbling from the highest in almost three months.
New York oil rose to $85.09 a barrel. Oil’s relative strength index is about 26, staying below 30 for the longest period in more than 26 years. A level of 30 or below indicates to some analysts who study such charts that a rebound may be due. Silver in New York advanced 3 percent. Aluminum climbed 0.9 percent after Norsk Hydro ASA said it will close an Australian smelter, curbing supplies.
The MSCI Emerging Markets Index advanced 1 percent, advancing for a second day. India’s Sensex Index rallied 2.7 percent and the Jakarta Composite Index jumped 3.3 percent. Benchmark gauges in Poland, Hungary and Thailand rose more than 1 percent. The ruble strengthened 1.4 percent against the dollar as Russia’s government held its first sale of local-currency debt after canceling three auctions in May.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Richard Frost in Hong Kong at rfrost4@bloomberg.net
To contact the editor responsible for this story: Stuart Wallace at Swallace6@bloomberg.net
