European shares rose with stocks in Asia, where the benchmark regional index hit a six-year high, while Australian bonds followed Treasuries lower before the Federal Reserve meets. New Zealand’s dollar dropped on a reduced milk-price forecast and South Africa’s rand fell.
The Stoxx Europe 600 Index increased 0.2 percent by 8:17 a.m. in London, rebounding from two days of losses. Standard & Poor’s 500 Index futures were little changed after the gauge ended the U.S. day up less than 0.1 percent. The MSCI Asia Pacific Index (MXAP) added 0.3 percent. Yields on 10-year Australian government bonds rose four basis points. Oil fell a second day in New York. The kiwi slumped 0.4 percent versus the dollar, the rand slid 0.5 percent and Russia’s ruble weakened a fourth straight day.
Fed policy makers are expected to cut bond purchases for the sixth time while debating the preconditions for increasing interest rates at their two-day meeting that ends tomorrow. Housing data is due in the U.S. today, with reports on gross domestic product and payrolls also scheduled for this week. Chinese shares extended gains after the Hang Seng China Enterprises Index yesterday capped a 20 percent advance from this year’s low.
“The equities rally will continue for the rest of the year,” Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion, said by phone. “We’re seeing economic growth filtering through to corporate earnings. While Fed tapering will continue, we believe the earliest interest-rate increase will only happen middle of next year. The Fed is very clear that they will only raise rates provided the economy continues to recover.”
Seventeen of the 19 industry groups on the Stxx 600 advanced today. The gauge dropped the last two days and trades at 15.4 times projected earnings for member companies. The MSCI Asia Pacific Index trades at 13.6 times , the most expensive valuation since December, while the S&P 500 trades at 16.6 times estimated earnings, data compiled by Bloomberg show. The MSCI All-Country World Index has a valuation of 15.4.
UBS AG increased 0.7 percent after Switzerland’s biggest bank reported a 15 percent jump in second-quarter profit on lower costs, and said it settled a German tax investigation. Deutsche Bank AG, Europe’s biggest investment bank, climbed 1.2 percent after reporting revenue from debt trading that beat analysts’ estimates in the second quarter while net income fell short of projections.
Michelin & Cie., Europe’s largest tiremaker, slid 1.8 percent after announcing first-half earnings that rose less than analysts forecast as pricing pressure sapped the benefits of lower raw materials costs.
Renault SA, Europe’s third-largest carmaker, dropped 3.1 percent afte r it reported a 25 percent jump in first-half profit as more Europeans opted for no-frills vehicles from its Dacia brand and the manufacturer cut spending.
The Micex Index of Moscow stocks climbed 0.8 percent after closing at the lowest since May 8 yesterday. The ruble slipped 0.2 percent to 35.6075 per dollar and 0.3 percent to 47.8350 to a euro. The yield on Russia’s 2027 bond climbed five basis points to 9.38 percent.
The U.S. and European Union may move as soon as today to impose tougher sanctions against Russia as Vladimir Putin’s government sought replacements for defense imports and considered restrictions on some agriculture products from America and its allies.
The Hang Seng China Enterprises Index advanced 0.5 percent today, extending a five-day, 6.9 percent rally, while the Hang Seng Index added as much as 0.9 percent to the topmost level since Nov. 12, 2010. The enterprises gauge, which tracks mainland Chinese stocks listed in Hong Kong, climbed yesterday to the highest close since Dec. 11.
The number of transactions for futures on China’s CSI 300 Index fell yesterday to the lowest level in 10 months versus share volumes in the cash market, data compiled by Bloomberg show, indicating traders may be turning bearish after stock gains. The last two times the ratio fell this low, in September and in February 2013, the CSI 300 sank an average 8.2 percent over two months. The measure added 0.3 percent today.
South Korea’s Kospi climbed 0.6 percent, closing at the highest level since August 2011. The gauge rallied as foreign investors pumped $2.72 billion into Korean stocks this month through yesterday and were again net buyers of the securities today, exchange data show.
The won rose to 1,024.50 per dollar, after ending yesterday little changed. The Korean currency is down 1.3 percent in July for the worst performance against the greenback of 11 Asian currencies tracked by Bloomberg.
New Zealand’s dollar dropped to 85.09 U.S. cents after Fonterra Cooperative Group Ltd. (FSF) lowered its farmgate milk price forecast to NZ$6 a kilogram, citing global output and the strong currency.
Australian government bonds due in a decade yielded 3.47 percent, up five basis points, or 0.05 percentage point. Ten-year Treasury yields were little changed at 2.49 percent after rates rose two basis points in New York.
Fed policy makers will cut asset purchases by another $10 billion to $25 billion tomorrow, according to the median of 38 economists’ estimates compiled by Bloomberg. There’s a 63 percent probability the Fed will raise interest rates to at least 0.5 percent by July 2015, based on Fed funds futures, versus a 43.2 percent chance at the end of May.
The U.S. Treasury sold $29 billion of two-year notes at the highest yield in more than three years yesterday as investors bet the economy will be strong enough for the Fed to remain on pace to raise interest rates next year.
West Texas Intermediate crude fell 0.2 percent to $101.50 a barrel, while Brent crude retreated 0.1 percent to $107.57.
Analysts predict U.S. stockpile data tomorrow will show gasoline supplies rose by 1 million barrels last week to the highest level since March. Nationwide crude inventories probably shrank by 1 million barrels, according to a Bloomberg survey.
Violence in Libya and Iraq isn’t affecting the flow of oil from the Middle East, with clashes between militias in Tripoli not spreading to oil-export terminals and the conflict in Iraq sparing the nation’s main oil-producing region.
Gold for immediate delivery increased to $1,307.17 an ounce, while palladium was little changed. Platinum retreated 0.2 percent to $1,485.18, and silver climbed 0.2 percent to $20.6308.