Stocks Rise With Industrial Metals on Economic Data, Pound Jumps

(Bloomberg) -- Signs economies in China and the U.K. were stabilizing lent support to financial markets buffeted by prospects of rising U.S. interest rates.

Mining stocks rebounded in Europe as lead, tin and zinc reached the highest levels in more than a year after an official Chinese factory gauge unexpectedly rose. Shares in Hong Kong climbed to a two-week high and S&P 500 Index futures signaled a two-day slump in U.S. stocks will end. The pound rallied after manufacturing in Britain bounced back from a post-Brexit slump. The dollar advanced against most of its peers while bonds retreated before Friday’s payrolls report.

Signs that China’s economic slowdown is abating may bolster demand for riskier assets, while a rebound in U.K. factory activity helped ease concern that Britain’s vote to leave European Union will strangle growth. U.S. payrolls data due Friday may provide clues as to whether policy tightening will come at this month’s Federal Reserve meeting after a private jobs report Wednesday showed steady growth in the labor market.

“The global economy is doing better than a lot of people gave it credit for,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit in Hellerup, Denmark. “Brexit was by no means a catastrophe, the Fed has finally acknowledged that the U.S. economy is doing better than expected, and China hasn’t spiraled into some kind of mayhem. It’s starting to feel like a risk-on market.”

For Bloomberg Intelligence analysis of the private jobs data out Wednesday, click here.

Stocks

The Stoxx Europe 600 Index added 0.6 percent at 6:15 a.m. in New York, with trading volumes 34 percent higher than the 30-day average. Glencore Plc and Rio Tinto Group rose at least 1.3 percent, while Banco Santander and BNP Paribas climbed more than 2 percent.

Pernod Ricard SA advanced 2.3 percent after forecasting profit growth for the current fiscal year. Elekta AB gained 2.9 percent after the Swedish maker of medical devices posted better-than-expected quarterly earnings.

S&P 500 Index futures rose 0.1 percent, indicating equities will bounce back from Wednesday 0.2 percent decline. Salesforce.com Inc. slid 6.8 percent in early New York trading after forecasting fiscal third-quarter revenue that may fall short of some analysts’ estimates.

In Hong Kong, Wynn Macau Ltd. and Galaxy Entertainment Group Ltd. jumped more than 5 percent after Macau reported its first increase in monthly gaming revenue in more than two years. The Hang Seng China Enterprises Index -- last month’s best-performing stock measure globally -- rose 0.7 percent.

"The PMI data was positive for China’s risky assets,” said Tim Condon, head of Asian research at ING Groep NV in Singapore. Even so, investors are ”cautious about a September rate hike and tomorrow’s payrolls report could push the Fed to follow through.”

Commodities

Zinc rose as much as 1.2 percent to $2,338.50 a metric ton on the London Metal Exchange, its highest since May 2015. Lead and tin both gained as much as 1.1 percent to highs not seen since last June and February, respectively. Copper climbed 0.4 percent.

“Today’s PMI data is a good surprise,” said Wei Lai, an analyst with Cofco Futures Ltd. in Shanghai. “It will initiate strong expectations for demand in the autumn and metals will be supported at least over the coming two months.”

Crude oil erased earlier gains to trade little changed at $44.76 a barrel as a strengthening dollar provided a potential obstacle to demand in countries other than the U.S. West Texas Intermediate tumbled 3.6 percent on Wednesday. U.S. inventories increased by 2.28 million barrels last week, keeping supplies at the highest seasonal level in almost three decades, official data show.

An oversupply paired with soft demand battered European gas contracts, with gas for immediate delivery in the U.K. plunging as much as 18 percent to the lowest price in about seven years.

Currencies

The pound surged to $1.3264. IHS Markit said its Purchasing Managers Index, which dropped below the key 50 level in July, jumped by a record to 53.3. That was far better than economists had forecast; the median estimate in a Bloomberg survey was for a reading of 49. New orders rose, with sterling’s recent drop “by far the main factor” for the improvement in exports, Markit said.

The dollar climbed against 11 of its major counterpart, gaining 0.2 percent to $1.1137 per euro and 0.1 percent to 103.56 yen. Fed Vice Chairman Stanley Fischer indicated last week that a U.S. interest-rate hike is possible in September and said Tuesday that the central bank would base its decision on economic data, putting added focus on the payrolls report.

Malaysia’s ringgit sank 0.7 percent after Wednesday’s drop in crude prices dimmed prospects for Asia’s only major net oil exporter. The Aussie strengthened 0.4 percent following the manufacturing figures for China, Australia’s biggest export market.

Bonds

The yield on 10-year U.S. Treasuries increased two basis points to 1.60 percent, after a 13 basis point jump in August that marked the biggest increase since June 2015.

Bill Gross, the billionaire manager of the Janus Global Unconstrained Bond Fund, recommends the Fed raises interest rates at the Sept. 20-21 policy meeting and again by the middle of next year. Futures are pricing in a 36 percent chance of a rate hike this month and a 47 percent chance of two quarter-percentage-point increases by the end of 2017.

U.S. employers are projected to have added 180,000 jobs in August, according to a Bloomberg survey, and Gross said a number of 150,000 or higher should be enough to provoke Fed tightening this month. Reports on jobless claims and manufacturing are due today.

Panasonic Corp. raised 400 billion yen ($3.9 billion) in the biggest bond issuance by a non-financial company in Japan this year. The issuance included 200 billion yen of five-year notes at a yield of 0.19 percent, half the price it paid to issue debt of that tenor in March 2015.

--With assistance from Winnie Zhu Kyoungwha Kim Emma O'Brien Choong En Han Sofia Horta e Costa Eddie van der Walt Alan Soughley and John Ainger To contact the reporters on this story: James Regan in Hong Kong at jregan19@bloomberg.net, Stephen Kirkland in London at skirkland@bloomberg.net. To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net, Stephen Kirkland at skirkland@bloomberg.net.