U.S. Stocks Rally as Oil Rebounds Above $40; Gold, Lira Decline

HSBC Plans $2.5 Billion Buyback as Profit Falls 45%
  • Gasoline stockpiles drop most since April, buoying crude
  • Asian index futures signal rebound after regional selloff

U.S. equities snapped a two-day retreat as a rebound in crude oil boosted energy producers, offsetting declines in defensive shares. Gold snapped its longest rally in six weeks and the advance in global bonds faltered.

The S&P 500 Index rose to within 0.7 percent of an all-time high, while emerging-market equities slipped amid lingering concern over the outlook for global growth. Crude oil rebounded, rallying past $40 a barrel after U.S. inventories data showed a drop in gasoline stockpiles. Gold fell from a four-week high as copper and lead declined. Treasuries advanced as a four-day selloff in Japanese government bonds abated, while the Turkish lira sank after data showed inflation quickened faster than economists expected.

July’s global stock rebound has has faltered as we move into August, with oil descending into a bear market and economic data failing to bolster confidence in global expansion. While central banks and governments have signaled unprecedented support, Japan’s latest efforts -- which include monetary and fiscal stimulus -- have fallen flat amid concern it won’t be enough to revive price growth in Asia’s second-largest economy. The Bank of England is expected to cut benchmark interest rates on Thursday, while jobs data in the U.S. Friday could provide clues as to the outlook for Federal Reserve policy.

“There’s slow movement in a market that’s looking for a reason to go up or go down -- it just hasn’t found any,” said Jeff Carbone, managing partner of Cornerstone Financial Partners, which oversees almost $1.1 billion in assets in Charlotte, North Carolina. “We haven’t seen that breakout that would suggest the market is based on fundamentals, it’s still very tied to central banks.”

Services purchasing managers’ indexes out Wednesday from Asia to Europe and the U.S. did little to color perceptions of how the world economy is faring. A gauge for China showed a slower pace of expansion in July, while that for Britain pointed to the most severe decline in seven years following the U.K.’s vote in June to quit the European Union. Growth at U.S. service providers cooled in July after reaching a seven-month high, according to the Institute for Supply Management’s non-manufacturing index.

Stocks

The S&P 500 rose 0.3 percent to finish at a session high of 2,163.79 by 4 p.m. in New York, after slipping 0.8 percent over the previous two days. The Dow Jones Industrial Average halted a seven-day decline that marked its longest rout since last August.

American International Group Inc. jumped the most in more than four years after profit beat estimates, while Biogen Inc. lost 2.7 percent amid doubts it could be a takeover target. Energy shares surged 1.8 percent, led by a 8 percent rally in Chesapeake Energy Corp.

Trading at 18.4 times projected earnings for member companies this year, the S&P 500 is still near its most expensive level in more than a decade. Some stronger-than-estimated financial results and speculation that central banks will maintain loose monetary policy have helped underpin equities near record levels.

The Stoxx Europe 600 Index climbed less than 0.1 percent after dropping 1.9 percent in the previous two sessions to a three-week low. The MSCI Asia Pacific Index fell 1.8 percent, its biggest drop since June 24, while the MSCI Emerging Markets Index lost 1 percent, closing at a two-week low.

Futures on Asian stock indexes mostly signaled gains, with contracts on Australia’s S&P/ASX 200 Index, the Kospi index in Seoul and Hong Kong’s benchmarks up at least 0.4 percent. Nikkei 225 Stock Average futures rallied 0.3 percent in Osaka, before yen-denominated contracts on the Japanese stock measure fell 0.2 percent in Chicago.

Currencies

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, climbed 0.3 percent from a five-week low as signs of U.S. labor-market strength fueled speculation traders will bring forward bets on Fed rate increases.

The yen weakened 0.4 percent to 101.24 per dollar, after touching 100.68 on Tuesday, its strongest level since July 11. The Japanese government’s stimulus plan incorporates 13.5 trillion yen of fiscal measures -- including 7.5 trillion yen in new spending starting this year, and 6 trillion yen in low-cost loans.

“After all the build-up, it’s a disappointment,” Shane Oliver, a global investment strategist at AMP Capital Investors Ltd. in Sydney, which manages more than $110 billion, said by phone.

For more on Japan’s fiscal stimulus boost, click here.

The MSCI Emerging Markets Currency Index slipped 0.3 percent, with the lira down 0.7 percent to 3.0132 per dollar, the steepest drop among developing-nation currencies. Headline inflation in Turkey accelerated to 8.79 percent from a year earlier, surpassing a median expectation of 8.16 percent in a Bloomberg survey.

Bitcoin fell as much as 15 percent, extending losses after one of the largest exchanges halted trading because hackers stole about $65 million of the digital currency.

Bonds

The record-setting global bond market rally appears to be coming undone, with the average yield on bonds in Bank of America Corp.’s G-7 Government Index climbing to 0.58 percent, the highest level in five weeks. A record low of 0.45 percent was reached in July.
Japan led the selloff, with yields rising from Australia to Germany.

Yields on 10-year Treasuries slipped one basis point, or 0.01 percentage point, to 1.54 percent, following a two-day advance of about 10 basis points.

Germany’s government bonds held a two-day drop as the nation auctioned two-year securities at a time when some investors are questioning the sustainability of a rally that’s pushed the yield on more than 80 percent of Europe’s benchmark sovereign securities below zero.

Commodities

Oil increased after U.S. gasoline crude stockpiles fell the most since April amid an increase in refinery operating rates.

West Texas Intermediate crude jumped 3.3 percent to settle at $40.83 a barrel, after falling 5 percent over the previous two sessions. Futures touched $39.19 earlier on, the lowest intraday price since April 18.

“The move in gasoline might have legs because we had a draw while refinery utilization increased,” said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. “Gasoline production decreased while refinery utilization increased, which probably means they are already trying to maximize their distillate output. We could be in for another gasoline inventory drop next week.”

Gold halted its longest rally in six weeks, after a private report showed the U.S. job market remained resilient, curbing demand for the haven asset. Futures for December delivery slipped 0.6 percent to $1,364.70 an ounce in New York. Through Tuesday, prices gained for six straight sessions in its longest rally since June 16.

Copper led declines in industrial metals amid mounting signs that global demand is slowing. Futures for delivery in September declined 0.6 percent to $2.1955 a pound in New York.

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