Stocks Rise Globally as Credit Risk Falls, Pound Weakens

Frankfurt (Aug 19)  Shares rose around the world and measures of European corporate credit risk fell to the lowest level in six weeks as political tensions eased. The pound weakened after U.K. inflation cooled more than forecast.

The MSCI All-Country World Index advanced 0.2 percent at 7:21 a.m. in New York. The Stoxx Europe 600 Index added 0.4 percent while Standard & Poor’s 500 Index futures (SPX) and Nasdaq 100 Index contracts each rose 0.2 percent. The Markit iTraxx Europe index of credit-default swaps on 125 investment-grade companies fell to the lowest since July 7. Sterling weakened against all 16 of its major peers. Russian stocks climbed for an eighth day.

The Red Cross is close to a safe-passage plan for a Russian aid convoy intended for Ukraine and the U.S. said it will continue “limited” airstrikes against Islamic State militants in Iraq. U.K. inflation was 1.6 percent in July, compared with economists’ forecast of 1.8 percent. Home Depot Inc. and Medtronic Inc. earnings topped analysts’ estimates and releases are scheduled on U.S. housing starts and inflation.

“The perceived easing of tensions between Russia and Ukraine has certainly lifted sentiment,” Richard Hunter, the head of equities at Hargreaves Lansdown Plc in London, wrote in an e-mail. “Housing starts and inflation data later today may well add to the current optimism that the U.S. economic recovery is firmly on track.”

The Stoxx 600 rose 1.2 percent yesterday, closing at its highest level of the month. The European gauge trades at 15.1 times estimated earnings compared with 13.7 for the MSCI Asia-Pacific Index and 16.5 times projected earnings for the S&P 500 Index.

Maersk, ThyssenKrupp

A.P. Moeller-Maersk A/S rose 4.9 percent after the owner of the world’s largest container-shipping line raised its full-year profit forecast. ThyssenKrupp AG gained 1.9 percent after a report that Germany’s largest steelmaker will sell some businesses.

BHP Billiton fell 4.5 percent after reporting that full-year underlying profit rose less than analysts had forecast. The world’s biggest miner also said it will spin off a company that will include aluminum smelters and South African energy.

The volume of Stoxx 600 shares changing hands today was 30 percent lower than the 30-day average, according to data compiled by Bloomberg.

U.S. Futures

Futures on the S&P 500 expiring in September rose today after the index gained 0.9 percent yesterday, the most in more than a week. The gauge closed 0.8 percent away from its record. About 76 percent of S&P 500 companies that have reported results this season beat analysts’ estimates for profit, while 65 percent exceeded sales projections, according to data compiled by Bloomberg.

The Nasdaq 100 advanced 0.8 percent yesterday, completing its biggest four-day gain since May and closing at its highest level since September 2000.

The MSCI AC Asia Pacific Index (MXAP) rose 0.7 percent today, the most in more than a week, after ending little changed yesterday.

The pound declined 0.5 percent to $1.6651 after falling to $1.6634, the lowest since April 8.

The MSCI Emerging Markets Index added 0.5 percent, heading for the highest close since January 2013. Benchmark gauges in South Korea, Taiwan and Hungary gained at least 0.9 percent.

Russia’s Micex rose 0.8 percent to a one-month high. The ruble weakened 0.3 percent per dollar a day after the central bank widened the ruble’s trading band as part of a plan to float the currency by year-end.

Central Bank

Ukraine’s central bank raised its overnight refinancing rate to 17.5 percent from 15 percent. The hryvnia slid 0.9 percent and the Ukrainian Equities Index also lost 0.9 percent while the yield on the government’s July 2017 Eurobond fell three basis points to 10.09 percent.

The Shanghai Composite Index gained 0.3 percent, advancing for a third day to an eight-month high. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong also added 0.3 percent, to the highest since May 2008.

The cost of insuring against losses on corporate debt declined, with the Markit iTraxx Europe decreasing more than one basis point to 60.1 basis points.

The Markit iTraxx Crossover Index linked to 60 companies with mostly high-yield ratings dropped five basis points to 248 basis points, the lowest since July 30.

Yields on investment-grade corporate bonds in euros held at a record low of 1.39 percent, according to Bank of America Merrill Lynch index data.

Lowest Price

West Texas Intermediate oil futures climbed as much as 0.7 percent to $97.05 a barrel in New York. Brent added 0.3 percent to $101.86 a barrel today after sliding to the lowest price in almost 14 months yesterday as Kurdish and Iraqi forces regained control of Iraq’s largest dam, stalling an advance by militants.

Wheat for December delivery declined 0.7 percent to $5.505 a bushel on the Chicago Board of Trade. Corn slipped 0.6 percent to $3.6875 a bushel. Gold gained 0.1 percent to $1,300.55 an ounce in London trading. Copper added 0.1 percent to $6,908.50 a metric ton on the London Metal Exchange, with aluminum climbing 0.8 percent to $2,036.50 a ton.

A report at 8:30 a.m. in Washington will show U.S. housing starts increased at a 965,000 annual pace in July, faster than the 893,000 rate in June, according to the median estimate of economists surveyed by Bloomberg. U.S. consumer prices increased 2 percent in July from a year ago versus 2.1 percent the previous month, according to the median estimate of economists surveyed by Bloomberg News.

The Federal Reserve tomorrow releases the minutes of its last meeting before central bankers meet in Jackson Hole, Wyoming, this week.

Government Debt

Yields on 10-year U.S. Treasuries fell two basis points to 2.37 percent today, after snapping a three-day drop in New York.

Rates on 10-year New Zealand government debt climbed three basis points to 4.16 percent after declining about 11 basis points over the past three trading days.

The kiwi dropped to 84.55 U.S. cents in a third day of losses, touching 84.26, the weakest intraday level since Aug. 13. New Zealand’s government cut its forecast for economic growth and projected smaller budget surpluses as it opened the books a month before a general election.

Source: Bloomberg