Global Stocks Erase 2016 Losses on China Outlook; JPMorgan Jumps

A Bullish Equities View With BlackRock's Richard Turnill
  • Industrial metals surge amid retreat in haven investments
  • Banks, technology shares lead S&P 500 to four-month high

Global equities erased losses for the year, while commodities from copper to grains surged as an improvement in China’s economic outlook spurred a rally in risk assets. U.S. stocks climbed to a four-month high as JPMorgan Chase & Co.’s earnings topped estimates.

The Standard & Poor’s 500 Index capped its biggest two-day rally since March 2, while Brazil’s Ibovespa hit a 10-month high. European shares climbed the most in a month and Russia’s benchmark closed at the highest level since 2008. Copper and iron ore jumped as haven assets including the yen and gold retreated. The dollar rallied the most in three weeks after falling to a nine-month low. Ten-year Treasury notes rose for the first time in four days after a $20 billion auction of the securities drew a lower-than-forecast yield.

After concern over China’s outlook roiled financial markets during the first six weeks of the year, data Wednesday showing exports rose the most in a year last month added to signs the slowdown may not be as deep as some investors feared, fueling the recovery in stocks from Asia to the U.S. Speculation the oil market will soon find some enduring stability is also helping prop up equities, while JPMorgan’s results countered concern over what’s projected to be the worst American earnings season since the global financial crisis.

“It’s a strong day overseas and China data was much better than expected,” Mark Kepner, an equity trader at Chatham, New Jersey-based Themis Trading LLC, said by phone. “While JP Morgan had a tough quarter, they still beat estimates. If earnings come in better than expected -- with expectations so low -- if we have even a decent beat, you may see us break out.”

Stocks

The MSCI All-Country World Index climbed 1.4 percent as of at 4:15 p.m. in New York, pushing its gain from a 2016 low reached Feb. 11 to 14 percent. The gauge of global equities is now up 0.8 percent for the year, wiping out a slide of as much as 12 percent from the end of 2015.

The S&P 500 rose 1 percent to 2,082.42, its highest level since Dec. 4, building on a 1 percent rally from Tuesday even as data showed retail sales and wholesale prices in the U.S. unexpectedly slumped last month, casting doubt on both the strength of consumer demand and nascent inflation.

JPMorgan jumped 4.2 percent after posting adjusted earnings per share of $1.41, above the $1.25 average estimate of 29 analysts surveyed by Bloomberg. JPMorgan was the first of the big U.S. lenders to report this season, with analysts projecting first-quarter profits at S&P 500 companies shrank 10 percent in the first quarter -- including a 20 percent decline at banks -- compared with earlier estimates that they will stagnate.

The Stoxx Europe 600 Index rose 2.5 percent, the most since March 11, for a fourth day of gains. Commodity producers -- one of the only industry groups that is posting gains for the year -- were among the biggest advancers. The FTSE 100 Index, which is weighted toward resource companies, turned positive for the year.

The MSCI Asia Pacific Index jumped 1.8 percent to its highest close since Jan. 1. The Hang Seng China Enterprises Index of mainland Chinese shares listed in Hong Kong climbed 4 percent, while the MSCI Emerging Markets Index rose for a fifth day, rising 1.6 percent. Russia’s Micex Index added 1.8 percent, led higher by mining and consumer companies.

Currencies

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, rose 0.6 percent, rallying from its lowest point since June 22. The U.S. currency added 1 percent to $1.1274 per euro, its strongest level in two weeks, and gained 0.7 percent to 109.34 yen.

The greenback’s gains after the past two years have been fueled by the Fed moving toward tighter monetary policy while other global central banks deployed negative rates and boosted stimulus. Losses have piled up in 2016, however, as declining odds of higher U.S. interest rates this year dims the appeal of dollar-denominated assets.

The Canadian dollar fell from near its strongest level in nine months after Bank of Canada Governor Stephen Poloz mentioned the currency’s recent strength and said he might have been inclined to cut rates if not for the federal government’s fiscal stimulus.

Brazil’s real retreated after the central bank stepped up efforts to weaken the currency via an auction of foreign-exchange reverse swaps.

Commodities

Grain traders are shrugging off signs of bigger supplies and sending prices to their biggest rally in seven months on an improving outlook for Chinese demand. The Bloomberg Grains Subindex jumped 3.7 percent in two days, the largest such advance since mid-September.

Oil declined from a four-month peak amid speculation over the potential outcome of a meeting of major suppliers to discuss freezing output. U.S. industry data also showed crude stockpiles expanded last week. West Texas Intermediate fell 1 percent to settle at $41.76 a barrel and Brent dropped 1.1 percent to $44.18.

Industrial metals and mining shares jumped as the Chinese trade data showed demand is recovering in a nation that is the world’s biggest consumer of commodities. Freeport-McMoRan Inc., the biggest publicly traded copper miner, closed at near its highest price in five months.

Gold futures fell 1 percent to $1,248.30 an ounce, slipping from the highest level in more than three weeks as investors assessed the timing of borrowing-cost hikes in the U.S.

Bonds

Treasuries rose for the first time in four days, sending yields on 10-year securities down by one basis point, or 0.01 percentage point, to 1.77 percent. Rates climbed nine basis points over the previous three days.

The notes sold Wednesday yielded 1.765 percent, compared with an estimate of 1.780 percent in a Bloomberg survey. The Federal Reserve is gauging whether it can raise U.S. interest rates as central banks in Europe and Japan have boosted stimulus to combat slow global growth, dragging bond yields lower abroad.

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