U.S. Shares Rise to 7-Month High Before Jobs; Bonds, Oil Climb

OPEC Fails to Agree on Oil Output Ceiling
  • S&P 500 closes above 2,100 as health-care stocks drive gains
  • Payrolls data in focus after OPEC, ECB fail to drive trading

U.S. stocks rebounded from a morning selloff to close at a seven-month high, while Treasuries advanced as investors awaited Friday’s American jobs data for clues to the timing of the Federal Reserve’s next policy move. Oil hovered near $49 a barrel.

The S&P 500 Index ended above 2,100 points for the first time since April, as a rally in health-care shares pushed the gauge to its highest level since November. Oil erased losses amid a drop in U.S. supplies, even after OPEC members failed agree on production limits at a meeting in Vienna. Brazil’s currency rose after Acting President Michel Temer scored a victory in his effort to shore up the country’s finances. European stocks and the euro fluctuated after the European Central Bank stood pat on interest rates, while leaving the door open for additional stimulus.

Investors are entering June on a tentative footing, with the month playing host to a number of key events that may determine the outlook for financial markets over the next six months. The ECB and OPEC meetings came ahead of monthly U.S. payrolls data, which could solidify or dash expectations for a Fed rate hike as soon as this month. Equities have failed to retake highs reached in late April, with the U.S. central bank apparently intent on tightening policy even amid signs of uneven growth globally. Also on investors’ radars is Britain’s vote on whether to remain in the European Union, due in three weeks.

“You’ve got to give the market some credit,” Andrew Brenner, head of international fixed income at National Alliance Capital Markets in New York, said by phone. “You have a lot of major stuff coming up in the market with investor sentiment extremely negative, and it doesn’t seem to go down. That’s a real positive itself.”

The ECB didn’t lift its inflation targets Thursday, sparking concern that the enlarged stimulus program has yet to have an impact a day after manufacturing reports from Asia to Europe signaled tepid growth. A report from the ADP Research Institute showed 173,000 workers were taken on in the U.S. in May, while filings for unemployment benefits declined for a third consecutive week, according to separate data.

Stocks

The S&P 500 Index rose 0.3 percent to 2,105.26 as of 4 p.m. in New York, after two days of closing basically little changed. The index had twice failed to hold 2,100 this week, a level that has provided a cap to two rallies in the past eight months. It’s still 1.2 percent below the all-time high reached May 21, 2015.

“Investors are rightly fixated on tomorrow’s release with labor figures,” said Eric Wiegand, senior portfolio manager at the Private Client Reserve of US Bank in New York. “Between the ECB, looking at initial jobless claims, and you add the ADP numbers and also OPEC, it really points to the limited expectations and none of the data points being outside the realm of what was anticipated.”

The Stoxx Europe 600 Index rose 0.1 percent, after capping its biggest two-day decline in four weeks on Wednesday. A drop in energy companies helped outweigh gains among banks.

Energy and raw-material producers led the MSCI Emerging Markets Index up 0.3 percent in its first daily advance this week. Chinese shares climbed in the final half hour of trading, lifting the Shanghai Composite Index up 0.4 percent to a one-month high. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 0.6 percent.

Futures on Japanese shares signaled more losses for Friday, following a 2.3 percent slide in the Nikkei 225 Stock Average as the yen climbed. Contracts on the index were down 1.5 percent to 16,605 in Chicago, while futures on other Asian stock gauges foreshadowed gains. Those on the Kospi index in Seoul and Australia’s S&P/ASX 200 Index rose at least 0.2 percent in most recent trading.

Commodities

West Texas Intermediate crude added 0.3 percent to $49.17 a barrel, snapping a four-day decline. The drop in U.S. crude inventories tempered the impact of the OPEC decision to stock to a policy of unfettered production, turning down a proposal to adopt a new ceiling on output. Brent crude rose 0.4 percent to $49.93 a barrel.

Saudi Arabia was discussing ideas with fellow OPEC members including restoring an output target scrapped in December, according to delegates familiar with the situation. Iran resisted overtures from the Saudis to restore a production objective.

While crude prices dipped briefly after Thursday’s meeting, there was little of the rancor that punctuated last December’s gathering. The more harmonious atmosphere meant the group was able to appoint a new secretary-general -- Nigeria’s Mohammed Barkindo -- something it hadn’t been able to agree on since 2012.

Soybean futures jumped to the highest level in almost two years amid forecasts for dryer weather in the U.S. growing area.

Aluminum led declines among some industrial metals, falling 1.9 percent, while copper lost 0.2 percent. Zinc, lead and tin advanced in London. Gold for immediate delivery dropped 0.2 percent to $1,211 an ounce, falling for the 11th time in 12 days.

Currencies

Currency investors let down by lack of surprises from OPEC and the ECB review turned their attention to Friday’s U.S. jobs report. Economists predict nonfarm payrolls rose by 160,000 workers in May, matching the increase for April, while the jobless rate is expected to have fallen to 4.9 percent, from 5 percent.

Investors are paying close attention to U.S. data after Fed officials indicated a potential interest-rate hike as soon as this summer was contingent on continued improvement in the economy.

The Bloomberg Dollar Spot Index added 0.1 percent after sliding 0.4 percent in the previous session. The U.S. currency lost 0.3 percent to $1.1151 per euro and weakened 0.6 percent to 108.87 yen.

Brazil’s real strengthened 0.2 percent to 3.5935 per dollar, rising for a second day after the parliament’s lower house overwhelmingly approved a bill that will ease budget constraints. The MSCI Emerging Markets Currency Index added 0.1 percent.

Bonds

Yields on the 10-year Treasury note fell four basis points, or 0.04 percentage point, to 1.80 percent, while rates on two-year debt dropped one basis point to 0.89 percent.

Even as the spread between Treasury two- and 30-year securities fell to the lowest since 2008, there may be space for further so-called curve flattening as the market underestimates the chances of two interest-rate increases this year, according to BlackRock Inc. A flattening of the curve may suggest investors see rates going up.

Ten-year Japanese government bonds yielded minus 0.12 percent after a sale of the tenor achieved the highest bid-to-cover ratio since August 2014.

The ECB, which is set to begin buying corporate bonds next week, said it won’t have to sell notes downgraded to junk as it fleshed out the latest expansion of its stimulus program.

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