European Stocks Climb on German Confidence as Gold, Bonds Fall
European Stocks Climb on German Confidence as Gold, Bonds Fall
(Bloomberg) -- Equity markets got a boost from a report showing Germany’s business climate remained robust after Britain voted to leave the European Union. Bonds fell with gold before central bank meetings in the U.S. and Japan this week.
The Stoxx Europe 600 Index rose for the first time in three days after business confidence in the region’s largest economy proved more resilient in July than economists predicted. Ten-year Treasury notes retreated for a second day and gold extended its first back-to-back weekly drop since May. Turkish markets rallied the most worldwide after the prime minister said the government planned to set up a fund to support the economy following the failed coup.
Shares in Europe jumped after the Munich-based Ifo institute’s index decreased less than forecast. U.S. equities advanced to a fresh record-high Friday amid signs of strength in the American economy that are prompting traders to increase bets the Federal Reserve will raise rates by year-end. While the Fed will probably keep rates on hold this week, economists predict the Bank of Japan’s most likely stimulus will be to increase in purchases of exchange-traded funds. The European Central Bank last week said it would be ready, willing and able to act if needed after studying more data on the impact of Brexit.
“You haven’t seen markets fall off a cliff” in the weeks after Brexit, said Ben Kumar, investment manager at Seven Investment Management, which oversees about 10 billion pounds ($13 billion). “You don’t have uncertain currency fluctuations, you don’t have uncertain monetary policy, you’re still getting clear messages from the ECB.”
Stocks
The Stoxx 600 climbed 0.5 percent at 6:32 a.m. in New York, with trading volumes 46 percent less than the 30-day average. Ryanair Holdings Plc rose 5.7 percent after maintaining its annual profit forecast. Ericsson AB advanced 3.3 percent after its chief executive officer stepped down. Julius Baer Group Ltd. increased 4 percent after adding new client money.
S&P 500 Index futures was little changed. Yahoo! Inc. rose 0.4 percent in premarket trading as a person familiar with the matter said Verizon Communications Inc. will announce plans to buy the company’s core assets for about $4.8 billion on Monday. Kimberly-Clark Corp., the consumer-products giant that owns Kleenex and Huggies, will report quarterly earnings before the open.
The Borsa Istanbul 100 Index added 2.9 percent after Prime Minister Binali Yildirim ruled out early elections and said Turkey plans a multi-billion dollar infrastructure fund to keep growth on track. The stock measure sank 13 percent last week, the most since 2008, amid sweeping purges of those accused of complicity in the failed attempt July 15 by military officers to seize power.
Currencies
The yen slipped 0.1 percent to 106.28 per dollar after weakening as much as 0.6 percent, while the euro rose 0.1 percent to $1.0992.
Sterling added 0.3 percent, after a 0.9 percent slide on Friday that was partly spurred by reports suggesting manufacturing and services industries contracted in July.
Turkey’s lira climbed 1.1 percent, the most among 31 major currencies.
Singapore’s dollar fell 0.2 percent to the lowest in almost a month. The city-state’s central bank, which uses the exchange rate rather than interest rates as its main tool, said the current monetary policy stance is appropriate as it forecast inflation may turn positive later this year. The Malaysian ringgit weakened for a sixth straight day, losing 0.2 percent.
Bonds
Treasuries maturing in a decade fell before an auction of $26 billion of two-year notes, the first of $103 billion of planned offerings of coupon-bearing securities this week. The yield increased two basis points to 1.58 percent.
U.K. gilts declined for the first time in three days, pushing the two-year yield up by two basis points to 0.15 percent, while that on 10-year securities were at 0.83 percent, an increase of three basis points from the close on Friday.
Exactly a month after voters opted for Brexit, U.K. bonds are yielding the least in 16 years relative to their U.S. counterparts, reflecting speculation that the Bank of England will loosen policy to mitigate the economic impact of the vote. The extra yield, or spread, that investors get for holding U.S. two-year notes iinstead of similar-maturity gilts was at 56 basis points, having reached 57 basis points on Friday, the most since May 2000, based on closing Bloomberg generic prices.
The cost of insuring corporate debt against default declined for the third time in four days. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies dropped one basis point to 68 basis points. An index of swaps on junk-rated businesses declined two basis points to 316 basis points.
Commodities
Precious metals were the worst performers among commodities as the dollar outperformed peers ahead of the Fed meeting, with gold for immediate delivery losing 0.6 percent to $1,315.16 an ounce. Silver retreated 1 percent, while palladium declined 0.7 percent.
West Texas Intermediate crude slipped 0.7 percent to $43.87 a barrel after sliding 1.3 percent on Friday to its lowest settlement since May 9. Rigs targeting oil in the U.S. rose for a fourth week to 371, the longest run of gains since August, according to Baker Hughes Inc. Money managers also added the most bets in a year on falling WTI prices during the week ended July 19, according to Commodity Futures Trading Commission figures.
“The general tone for the market at the moment is soft to sideways,” Ric Spooner, chief analyst at CMC Markets in Sydney, said by phone. “It’s being weighed down by U.S. dollar strength against a background of relatively high inventories and the fact the rig count has begun to creep up.”
Copper for three-month delivery added 0.2 percent in London, as nickel and zinc gained at least 0.5 percent. Speculators boosted their net-long position in copper to 18,284 U.S. futures and options in the week ended July 19, according to CFTC data released three days later. That’s up from 4,868 a week earlier and was the highest since March 29.
--With assistance from Ben Sharples Jonathan Burgos Ranjeetha Pakiam Camilla Naschert Sofia Horta e Costa Lukanyo Mnyanda and Jeremy Herron To contact the reporters on this story: Emma O'Brien in Wellington at eobrien6@bloomberg.net, Eddie van der Walt in London at evanderwalt@bloomberg.net. To contact the editors responsible for this story: Stephen Kirkland at skirkland@bloomberg.net, Justin Carrigan at jcarrigan@bloomberg.net, Neil Denslow