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Jun 15, 2016

Stocks Rebound With Emerging Markets Before Fed; Pound Advances: Bloomberg Markets - June 15, 2016

bloomberg.com

James Regan & Kelly Gilblom
Stocks advanced as markets took a respite from the steepest selloff in global equities since January before the Federal Reserve’s policy decision. The British pound rebounded from a two-month low, while Spanish and Italian bonds gained for the first time this week.

The Stoxx Europe 600 Index climbed from the lowest since February and emerging markets rose for the first time in five days. The pound strengthened after sliding more than 1 percent in two of the last three trading sessions, and the yen retreated from its strongest level since 2014. The yuan rose after falling to a five-year low following MSCI Inc.’s decision to keep Chinese equities out of its benchmark indexes. Crude sank for a fifth day to about $48 a barrel.
Calm appeared to resurface in markets as investors look toward the Fed for clues on the likely timing of the next interest-rate increases. Chair Janet Yellen, following worse-than-expected payrolls data earlier this month, reassured markets over the outlook for the U.S. economy and that policy makers wouldn’t rush to raise rates. Still, investors remain wary after $2.7 trillion was wiped off the value of global equities in four days on mounting concern Britain will vote to leave the European Union next week.
“Janet Yellen has been the fairy godmother of the bull market on a number of occasions,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit in Hellerup, Denmark. “I’m looking for her to repeat that performance.” Still, fears about Brexit “have finally spread beyond currencies and put a lot of pressure on all asset classes lately,” he said.
For an overview of issues facing central bank meetings this week, click here.
Stocks
The Stoxx Europe 600 Index added 1.1 percent at 10:45 a.m. in London, led by commodity producers higher as most metals advanced. Inditex SA pushed retailers ahead with a 2.9 percent increase after the maker of Zara clothing reported better-than-expected first-quarter profit. Schneider Electric SE climbed 2.7 percent after talks to buy a majority stake in Aveva Group Plc ended without a deal. The British software maker tumbled 14 percent.
Futures on the S&P 500 advanced 0.2 percent, after U.S. equities capped their fourth day of declines Tuesday. Data on producer prices and industrial production will be parsed for signs of the health of the world’s biggest economy.
The MSCI Emerging Markets Index rose 0.5 percent from a three-week low. The Shanghai Composite gained 1.6 percent, after earlier sliding as much as 1.1 percent following the MSCI decision. China’s benchmark is still down 18 percent for the year.
“It’s a sharp reversal so there has to be some government intervention,” said
Francis Lun, chief executive officer at Geo Securities Ltd. in Hong Kong. “The Chinese government never wants to see the market falling too much.”
Pakistan’s Karachi Stock Exchange KSE100 Index surged 2.8 percent to a record after the nation’s equities were upgraded to emerging-market status by MSCI.
Currencies
The pound gained the most in a week against the dollar as data showed an unexpected acceleration in U.K. wage growth and a lower-than-estimated unemployment rate.
The MSCI Emerging Markets Currency Index added 0.2 percent, ending a 1.4 percent slide over the last four days. Russia’s ruble climbed 0.6 percent against the dollar, while Poland’s zloty rose 0.4 percent per euro.
The yuan rose 0.19 percent to 6.5840 a dollar, China Foreign Exchange Trade System prices show. It fell as much as 0.12 percent earlier Wednesday.
Bonds
Spanish bonds rebounded, with the yield on the nation’s 10-year security falling three basis points to 1.54 percent. The yield had climbed more than 14 basis points in the past three days. The yield on similar-maturity Italian bonds slide three basis points to 1.48 percent.
Ten-year U.S. Treasuries yielded 1.62 percent, after ending the last two sessions at 1.61 percent, the lowest closing level since 2012. The rate on similar-maturity German debt held near zero, after sliding into negative territory for the first time on Tuesday as a Brexit fueled demand for haven assets.
The cost of insuring corporate debt against default eased from three-month highs. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies declined two basis points to 85 basis points. The sub-investment grade Markit iTraxx Europe Crossover Index dropped seven basis points to 364 basis points.
Commodities
West Texas Intermediate crude slipped 1.1 percent to $47.96 a barrel, falling for a fifth day after the American Petroleum Institute reporting a 1.16 million-barrel increase in U.S. oil inventories for last week. Nigerian militants, whose attacks on oil infrastructure have sent the country’s output plunging to its lowest level in 27 years, also said for the first time they are considering peace talks.Copper rose 1.8 percent in London and nickel gained 1.5 percent, advancing for the first time in a week. Gold slipped 0.3 percent, after surging 3.4 percent over the last five days.
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