BLBG:Stocks Advance With S&P 500 Futures as Commodities Fall
European stocks gained with U.S. equity-index futures while emerging-market equities jumped to a six-week high after China’s premier said the economy will grow by at least 7 percent. Commodities fell for a third day.
The Stoxx Europe 600 Index added 0.3 percent to 301.25 by 10:44 a.m. in London and the Standard & Poor’s 500 Index futures climbed 0.2 percent. The MSCI Emerging Markets Index rose 1.3 percent. Corporate credit risk fell to an eight-week low and the Bloomberg Dollar Index halted a two-day decline. The S&P GSCI (SPGSCI) gauge of 24 raw materials fell 0.4 percent.
Chinese Premier Li Keqiang said the slowest economic growth policy makers will tolerate is 7 percent, Beijing News reported today. Volatility has waned since Federal Reserve Chairman Ben S. Bernanke told a congressional panel on July 17 that he hasn’t put bond purchases “on a preset course.” Apple Inc., United Parcel Service Inc. and Lockheed Martin Corp. are among companies set to post profits today after 72 percent of S&P 500 companies that have reported earnings so far beat analysts’ estimates.
“Markets are taking the change in tone from the Fed as a positive sign on growth and that’s suppressing volatility in equities, which is spilling over in to other assets,” said Adam Cole, head of Group of 10 currency strategy in London at Royal Bank of Canada. “At the moment equities tend to be pretty immune to any talk of Fed tapering.”
Swiss Watches
The Stoxx 600 extended a seven-week high. Royal KPN NV (KPN) soared 4.9 percent, extending yesterday’s 13 percent rally, after saying it will sell its German mobile-phone business to Telefonica SA. Swatch Group AG climbed 1.7 percent as the maker of Swiss watches reported first-half profit that exceeded analyst predictions. Sulzer AG sank 12 percent, the most in four years, as the Swiss pump maker cut its forecasts.
The VStoxx Index, which gauges the price of options on the Euro Stoxx 50 Index, fell 2.7 percent to 17. The volume of shares changing hands in Stoxx 600 companies was 33 percent greater than the 30-day average, according to data compiled by Bloomberg.
The S&P 500 closed at a record of 1,695.53 yesterday. Monetary stimulus from the Federal Reserve and corporate earnings have helped push the U.S. index up 151 percent from its March 2009 low.
The Chicago Board Options Exchange Volatility Index, or VIX (VIX), which measures options on the S&P 500, fell 2 percent to 12.29 yesterday. That’s the lowest since April 12.
Fed Stimulus
Sales of previously owned U.S. homes unexpectedly dropped 1.2 percent in June, data showed yesterday, bolstering the case for the Fed to keep stimulating the world’s biggest economy.
“Tapering is less of a threat to the market than many had feared a few months ago,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has about $130 billion under management. “By year-end, we’ll be looking at indexes being quite a bit higher than they are at the moment.”
The U.S. central bank will begin tapering in September a bond-buying program that has supported debt and equity gains, according to 50 percent of economists surveyed by Bloomberg.
Emerging-market stocks rose as benchmark gauges in South Korean, Taiwan, the Philippines, Thailand and Indonesia climbed more than 1 percent.
The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong jumped 3.7 percent, the most in more than six months, and the Shanghai Composite Index gained 2 percent.
The rupiah weakened 1.1 percent as Bank Indonesia allows a more rapid slide toward levels quoted in the offshore market.
Dollar Index
The Bloomberg Dollar Index gained 0.2 percent. New Zealand’s currency strengthened 0.3 percent to 79.92 U.S. cents after earlier touching 80.09, the highest since June 19.
Germany’s 10-year bund yield climbed three basis points to 1.55 percent. The yield on U.S. Treasuries of similar maturity increased two basis points to 2.50 percent.
Volatility in Treasuries as measured by the Merrill Lynch Option Volatility Estimate Move Index fell to 72.62 yesterday, the lowest level since May 24. The figure is down from 117.89 on July 5, which was the most since December 2010. The one-year average is 64.71.
JPMorgan Chase & Co.’s Global FX Volatility Index dropped for a ninth straight day to 9.16 percent, the lowest level since May 14. It touched a one-year high of 11.96 percent on June 24.
The cost of insuring against losses on corporate bonds fell to an eight-week low. The Markit iTraxx Europe Index of credit-default swaps on 125 investment-grade companies declined 0.9 basis point to 96.5 basis points, the lowest since May 28.
Copper dropped 0.5 percent after closing yesterday at a one-month high. Corn slumped 1.5 percent on beneficial U.S. growing weather and wheat dropped 0.8 percent.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jae Hur in Tokyo at jhur1@bloomberg.net
To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net
