- S&P 500 tops 2,100, reversing losses since yuan devaluation
- Oil and gold drive commodities lower; Turkish lira soars
The U.S. and Europe have, for one day at least, proven more influential within global financial markets than China, where softer manufacturing data failed to quell demand from equity investors who instead looked for signs of strength elsewhere.
American stocks joined gains in European equities, pushing the Nasdaq 100 Index to its highest level since 2000, after factory data in Germany, Italy and the U.S. topped estimates and as health-care deals fueled optimism. The unexpected acceleration in output hit demand for government bonds and boosted the euro. Most commodities took heed of the Chinese data, which showed manufacturing contracted again last month.
“The global data today shows stable economic conditions, which is improving sentiment,” said Mark Luschini, chief investment strategist in Philadelphia at Janney Capital Management LLC, which oversees about $68 billion. “M&A activity is always a good litmus test for the sentiment of companies and usually speaks well to market conditions, and we’ve seen some big deals lately.”
Signs of strength in the U.S. and European economies saw equities resume an autumn rally that sent global equities up the most in four years in October. The month marked a rebound from a third-quarter rout that was triggered by concern over the slowdown in China and its potential to spread. The prospect of additional central-bank stimulus is also underpinning optimism over global growth, with this week’s U.S. payrolls data seen as key to determining the likely timeline for interest rate increases from the Federal Reserve.
The Standard & Poor’s 500 Index climbed 1.2 percent to 2,104.05 by 4 p.m. in New York, the highest level since Aug. 10, the day before China roiled global markets by unexpectedly devaluing its managed currency. The gauge remains 1.3 percent below its all-time high after rallying 8.3 percent in October for the best performance in four years. The Nasdaq 100, which is dominated by technology shares, jumped 1.2 percent.
Energy shares in the S&P 500 led gains despite the pullback in oil, climbing 2.4 percent as a group to their highest close since July 30. Chevron Corp. and Exxon Mobil Corp. rose at least 3 percent, while Consol Energy Inc. rallied 17 percent for the biggest gain in the S&P 500 as investors sought out some of the biggest losers of the recent selloff.
Corporate deal activity helped boost health-care companies, with Dyax Corp. jumping 29 percent after Shire Plc agreed to buy the drugmaker for at least $5.9 billion. Mylan NV and AbbVie Inc. rose more than 3 percent. Pfizer Inc. climbed 3.5 percent as people with knowledge of the matter said the company is making progress in talks to buy Allergan Plc.
The Stoxx Europe 600 Index climbed 0.3 percent following its best month since 2009. Commerzbank AG jumped 6.6 percent, its biggest gain in almost two months, after the lender’s third- quarter profit exceeded analysts’ estimates. Greek banks also rallied after the government detailed how it will help lenders plug their 14.4 billion-euro ($16 billion) capital shortfall.
Stocks in Asia were the outliers, falling on the Chinese factory data amid losses among industrial companies. The MSCI Asia Pacific Index dropped 1.1 percent, the most in more than a month, as Japan’s Topix index slid 2 percent. Hong Kong-traded shares also retreated. Futures on indexes from Tokyo to Seoul, however, signaled a rebound for Tuesday.
Improving odds that the Federal Reserve will pull the trigger on a rate rise this year sent yields on 10-year Treasuries up three basis points, or 0.03 percentage point, to 2.18 percent. Futures traders put the chance of a U.S. rate increase in December, the last meeting of 2015, at 50 percent, up from 33 percent a month ago.
Bonds across the euro region declined after European Central Bank President Mario Draghi suggested further stimulus may not be required before the year is out. Italy’s 10-year yields climbed six basis points to 1.63 percent, while Spain’s also rose six basis points, to 1.72 percent. The yield on benchmark 10-year German bunds increased four basis points to 0.56 percent.
Draghi said more monetary stimulus is still an “open question,” in an interview with Italian daily Il Sole 24 Ore published on Oct. 31.
The euro rose a third day, extending its longest winning streak since the start of September, after Draghi suggested further monetary stimulus may not be required. The strong manufacturing report also boosted the shared currency. It added 0.1 percent to $1.1013 and climbed 0.2 percent to 133.01 yen after touching a six-month low on Oct. 29.
Currencies of countries exposed to China declined amid the weak manufacturing data there, with New Zealand’s dollar down 0.6 percent and the Thai baht falling 0.2 percent. The yuan lost 0.4 percent in offshore trading after gaining 1.2 percent last week as policy makers signaled they may loosen some capital controls.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, slipped 0.1 percent Monday in a third day of losses.
The MSCI Emerging Markets Index advanced 0.3 percent as Turkish stocks surged and the lira strengthened the most since 2008 after the party co-founded by President Recep Erdogan swept back into power, outweighing declines in Asia.
The 3.2 percent gain in the lira pushed it to the strongest level against the dollar since the end of July, while the Borsa Istanbul 100 Index rallied 5.4 percent, the best performance among 93 primary equity benchmarks worldwide.
Hong Kong’s Hang Seng China Enterprises Index declined 1.5 percent after surging 11 percent last month. It was the fifth straight drop for the measure of Chinese companies listed in Hong Kong, marking its longest losing streak since early September. The Shanghai Composite Index lost 1.7 percent.
The Bloomberg Commodity Index fell 0.6 percent, led lower by oil on the manufacturing data out of China, the world’s biggest user of raw materials.
Crude dropped from a two-week high as Russian production climbed and the Chinese numbers fueled concern over the outlook for demand. West Texas Intermediate crude for December delivery fell 1.3 percent to $46 a barrel, while Brent futures lost 1.4 percent to $48.85. Natural gas also slumped, ending the session down 2.8 percent on speculation an unusually warm start to the winter heating season in the U.S. will boost fuel stockpiles.
Gold declined to a four-week low and investors cut their holdings in bullion-backed funds to the smallest in two weeks as traders gave even odds that the Fed will raise interest rates in December. Higher U.S. rates tend to hurt gold’s appeal because it only offers returns through price gains.
Copper futures ended Monday little changed after falling in the previous two sessions, while an increase in orders to remove aluminum from warehouses sent the industrial metal up 1 percent in London. Zinc sank 1.5 percent.