BLBG:Europe Stocks Gain as Asia Shares Fall With Rupee, Rand
European stocks rose, extending two weeks of gains, as euro-area finance ministers prepared to meet. Shares in Asia fell and emerging market currencies weakened against the dollar after a U.S. jobs report added to the case for the Federal Reserve to reduce economic stimulus.
The Stoxx Europe 600 Index gained 0.8 percent by 8:06 a.m. in London after rising 1.2 percent last week. The MSCI Asia Pacific Index slid 1.5 percent while Standard & Poor’s 500 Index (SPX) futures added 0.1 percent. South Africa’s rand weakened 0.6 percent and India’s rupee sank to a record as the Dollar Index touched a three-year high. U.S. Treasuries rose after 10-year yields surged to a near two-year high. Silver and copper fell.
Finance ministers meeting in Brussels today are expected to discuss aid to Greece. U.S. employers added more workers than economists expected in June, data showed last week, stoking expectations the Fed will taper asset purchases that prompted capital flows into emerging markets. The dollar is extending gains that have made it the best performing major currency this year amid improving U.S. economic indicators and looser monetary policy from Europe to Japan.
“The general proposition in Asia is there’s been a huge capital outflow,” Warren Hogan, the chief economist at Australia & New Zealand Banking Group Ltd., said on Bloomberg Television. “The trend to diversify away from core markets has suddenly gone into reverse this year and it’s continuing.”
Equity Slide
More than four stocks fell for every one that rose on MSCI’s Asian gauge, which added 0.6 percent last week. Hong Kong’s Hang Seng Index and the Shanghai Composite Index dropped at least 1.6 percent. China’s money-market cash squeeze is likely to reduce credit growth this year by 750 billion yuan ($122 billion), an amount equivalent to the size of Vietnam’s economy, according to a Bloomberg News survey of analysts.
South Korea’s Kospi index sank 0.9 percent. Asiana Airlines Inc. tumbled 5.8 percent in Seoul after one of its planes crashed at San Francisco International Airport. Stocks in Taiwan, the Philippines, Thailand, Indonesia and India also declined.
The S&P 500 advanced 1 percent on July 5, capping a 1.6 percent gain last week. Alcoa Inc. will unofficially start the second-quarter U.S. earnings season as the aluminum producer reports results after the market closes in New York today.
Global equities have lost more than $3.7 trillion in value and U.S. Treasury yields have climbed to an almost two-year high since Fed Chairman Ben S. Bernanke signaled May 22 that the central bank’s asset-buying program could be tapered should the job market continue to improve. The purchases, currently at $85 billion a month, have helped MSCI’s World Index rally 18 percent in the past year.
Government Bonds
U.S. 10-year yields declined four basis points to 2.70 percent after touching 2.75 percent earlier today, the highest since August 2011. Australia’s 10-year bond yield climbed eight basis points to 3.90 percent and Japan’s 10-year yield rose 2 1/2 basis points to 0.88 percent.
Investors pulled a record $23.3 billion from global bond funds in the week ending June 26, with outflows from emerging markets jumping to an all-time high, according to EPFR Global. Bond yields in Singapore, Indonesia, South Korea, Thailand and Taiwan climbed today.
The cost of insuring bonds against non-payment in Asia increased, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed two basis points to 157 basis points, Royal Bank of Scotland Group Plc prices show. The measure is set to rise for the first time in three trading days, according to data provider CMA.
Dollar Strengthens
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback versus currencies of six major U.S. trade partners including the euro and yen, touched 84.588, the highest since July 2010, before trading little changed at 84.429. South Africa’s rand weakened 0.6 percent to 10.2605 per dollar.
European Central Bank President Mario Draghi speaks in Brussels today and Germany releases data on industrial production. Draghi last week pledged to keep interest rates low, in contrast with the Fed’s rhetoric.
Greek Finance Minister Yannis Stournaras said the government probably will reach a deal with international creditors before today’s Eurogroup meeting to keep bailout funds flowing to the country.
India’s rupee led declines among Asian currencies, plunging to an all-time low of 61.2125 a dollar, according to Bloomberg data, before paring losses amid speculation the nation’s central bank intervened. Thailand’s baht dropped to 31.53 versus the U.S. currency, the weakest since August 2012. The won touched a more than one-week low of 1,152.70 per dollar.
Gold for immediate delivery fell 0.2 percent to $1,221.26 an ounce, declining for a third day. Silver dropped 0.5 percent to $18.8209 an ounce. Copper in London slipped 0.1 percent to $6,780.50 a metric ton.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Emma O’Brien in Wellington at eobrien6@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
