- Yen pulls back as demand for haven assets eases after G-20
- Emerging-market currencies retreat on Fed rate concern
European stocks rose with U.S. index futures, while the yen retreated amid relief the resumption in Chinese equity trading following a two-day holiday didn’t spark a deeper selloff.
Most of the Stoxx Europe 600 Index’s 19 industry groups advanced after China’s central bank chief said his nation’s stock rout was close to ending. Commodity producers led gains as Glencore Plc’s plan to restructure boosted the company’s shares and lifted copper, while oil extended losses. The prospect of higher U.S. interest rates this year weighed on emerging markets, with a gauge of 20 currencies down for a fifth day.
While most mainland Chinese stocks rose Monday, declines among the large companies normally targeted for state buying dragged the Shanghai Composite Index down 2.5 percent. People’s Bank of China Governor Zhou Xiaochuan sought to reassure investors over the weekend, saying in a statement that intervention had stopped the free-fall in equities. Futures on the Standard & Poor’s 500 Index climbed 0.5 percent with U.S. markets closed for a holiday.
“We did have some reassurance from the Chinese authorities over the weekend that this could be more or less the end of the rout,” said Jane Foley, a senior currency strategist at Rabobank International in London. “But clearly the market is still very fragile as we’re staring directly at the next Fed meeting.”
Traders have pared bets on the Federal Reserve raising key rates at its September meeting. Odds are now at 32 percent, down from 54 percent a month ago, with monthly payrolls data released on Friday failing to provide investors with more clarity. Expectations have shifted to December, where the chance of a hike is currently 60 percent, according to futures data.
Chinese officials sought to shore up confidence in their economy at a meeting in Turkey of Group of 20 finance chiefs. The country’s unexpected currency devaluation Aug. 11 ignited a wave of global risk aversion, with more than $8 trillion wiped from the value of global equities since then.
China’s National Bureau of Statistic revised its reading on 2014 economic growth down by 0.1 percentage point to 7.3 percent Monday and data on foreign-currency reserves showed how much stabilizing the market has cost the authorities. The stockpile slid by a record $93.9 billion to $3.56 trillion last month as the central bank sold dollars to support the yuan.
The Stoxx 600 Index closed up 0.5 percent Monday, after gaining as much as 1.2 percent earlier in the session. The MSCI Asia Pacific Index lost 0.6 percent as stock gauges from Australia to Hong Kong retreated, while Japan’s Topix index erased declines to end the day up 0.1 percent.
Glencore jumped 7 percent in London after saying it plans to sell assets and shares to cut the company’s net debt by about a third. Euro-denominated bonds sold by Glencore surged to the highest level in two weeks, with securities due March 2021 rising 4.36 cents on the euro to 92.30 cents, data compiled by Bloomberg show. The cost of insuring Glencore’s senior debt against default fell to 319 basis points Monday from a more than three-year high of 445 basis points, according to data provider CMA.
(For more news on stocks, see: TOP STK.)
The MSCI Emerging Markets Index declined for a second straight day, losing 1.3 percent to a two-week low amid the Chinese losses. Malaysia’s ringgit sank 1.6 percent versus the dollar and the South Korean won weakened beyond 1,200 per dollar for the first time since 2011. Colombia’s local bonds fell to a four-year low after faster-than-expected inflation data.
More than two shares rose for each that fell in the Shanghai Composite, which traded for the first time since Sept. 2. The Hang Seng China Enterprises Index, which tracks mainland Chinese companies listed in Hong Kong, slipped 0.7 percent.
The lira slid to a record low and Turkish stocks dropped as concern over security deepened after Kurdish separatists killed soldiers in a roadside bomb attack Sunday.
Colombia’s Almacenes Exito SA and Mexico’s Grupo Lala SAB led gains among members of the MSCI Latin America index, while Latam Airlines Group SA fell 0.8 percent.
(For more news on emerging markets, see: TOP EM.)
Copper gained 0.5 percent in London after Glencore said it had suspended copper production at its Katanga operation in the Democratic Republic of Congo and its Mopani project in Zambia for 18 months. The suspension will remove about 400,000 metric tons of copper cathode from the market.
West Texas Intermediate oil slipped 3.9 percent in electronic trading to $44.26 a barrel, while Brent crude sank 4 percent to $47.63 as the chief executive officer of Russian oil producer OAO Rosneft ruled out a deal with OPEC on production cuts and amid concern over Chinese demand.
(For more news on commodities, see: TOP CMD.)
The yen weakened for the first time in three days, dropping 0.2 percent to 119.28 per dollar. The euro gained 0.2 percent to $1.1170, while the Australian dollar climbed 0.3 percent to 69.26 U.S. cents, rallying from a six-year low.
Britain’s pound was the best performer among developed markets, jumping 0.7 percent to $1.5277 as investors looked ahead to the Bank of England’s monetary-policy review later in the week. The gain ended a nine-day slump that coincided with speculators reversing bullish bets on the U.K. currency.
(For more news on currencies, see: TOP FX.)
Ten-year Treasury futures contracts fell 6/32 to 127 18/32 amid reduced demand for haven assets and as after the Chinese reserves data. Spain’s 10-year bond yields rose six basis points, or 0.06 percentage point, to 2.14 percent.
The cost of insuring investment-grade corporate debt fell for the third time in four days. The Markit iTraxx Europe Index, which tracks credit-default swaps on investment-grade companies, dropped less than one basis point to 73 basis points. The non-investment grade Markit iTraxx Europe Crossover Index declined 2.2 basis points to 337 basis points.
(For more news on bonds, see TOP BON.)