European Shares Rally on Draghi as Egypt Bonds Rebound

European shares rallied the most in two months and the euro weakened as European Central Bank President Mario Draghi made an unprecedented pledge to keep rates low for an extended period. Egypt’s bond yields fell the most on record after the army deposed President Mohamed Mursi.

The Stoxx Europe 600 Index gained 2.3 percent. Portugal’s main equity gauge jumped 3.7 percent. Standard & Poor’s 500 Index futures rose 0.9 percent to 1,623.80 with U.S. markets shut today for the Independence Day holiday. Brazil’s Ibovespa stock gauge climbed for the first time in five days. The yield on Egypt’s bonds due in April 2020 tumbled 148 basis points to a two-week low of 9.29 percent. The euro declined 0.7 percent to $1.2915 at 3:42 p.m. in New York.

Draghi said the policy stance will remain accommodative as long as needed and that risks to euro-area growth remain “on the downside.” Paulo Portas, the Portuguese minister whose resignation this week threatened to bring down the government, met with Prime Minister Pedro Passos Coelho to try to overcome differences on budget policy. Adly Mansour, the chief justice of Egypt’s constitutional court, was sworn in as interim president after the army ousted Mursi in a move it said aimed to restore stability.

“Draghi clearly says that the ECB is now giving explicit forward guidance, suggesting that interest rates will remain at current or lower level for a prolonged period of time,” Annalisa Piazza, a fixed-income analyst at Newedge Group in London, said in an e-mailed note.

U.S. Payrolls

The U.S. unemployment rate probably fell to 7.5 percent in June, matching April’s four-year low and down from 7.6 percent in May, according to the median forecast of 82 estimates in a Bloomberg survey before a Labor Department report tomorrow.

Brazil’s Ibovespa rose 1.6 percent, snapping a four-day losing streak. Companies controlled by the billionaire Eike Batista surged as he stepped down as chairman of MPX Energia SA. Batista’s flagship oil company, OGX Petroleo & Gas Participacoes SA, soared 16 percent, the best performance on the MSCI Emerging Markets gauge. The real appreciated 0.4 percent to 2.2595 per dollar, climbing from its weakest level since 2009. The Brazilian central bank intervened to stem the currency’s decline by selling foreign-exchange swaps.

Mexico’s IPC stock gauge advanced 1 percent. The Standard & Poor’s/TSX Composite Index of Canadian shares climbed 0.3 percent.

U.K. bonds gained while the pound declined after the Bank of England signaled a growing concern about rising bond yields and volatile markets.

Gilt Yield

The yield on 10-year gilts fell one basis point to 2.38 percent while the pound weakened 1.3 percent to $1.5081, the biggest drop since December 2011. The Bank of England said increasing market rates weigh on the outlook for the economy as policy makers kept borrowing costs and the stimulus program unchanged. Today’s announcement was the first by the central bank since Governor Mark Carney took the reins on July 1.

European stocks rebounded from their biggest drop in more than a week as carmakers and mining companies climbed. Taylor Wimpey Plc rose 7.1 percent as the U.K.’s second-largest housebuilder by volume said that its operating-profit margin increased in the first half.

Celesio AG slumped 7.5 percent as Jefferies Group LLC downgraded the drug distributor. The stock tumbled in the final half-hour of trading yesterday after the company’s supervisory board dismissed Markus Pinger as chief executive officer.

China Rally

The MSCI Emerging Markets Index rose for the first time in three days, rallying 1.1 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 1.4 percent after China’s government said fiscal funds should be used to stabilize economic growth. The Shanghai Composite Index gained 0.6 percent.

Egypt’s benchmark EGX 30 Index of stocks rallied 7.3 percent, the most since June 2012. The army yesterday ousted Mursi, the country’s first democratically elected president, and called early elections as part of a road map agreed on with politicians and religious leaders.

The won advanced 0.5 percent versus the dollar after South Korea said it will boost policies to add service-industry jobs and Goldman Sachs Group Inc. affirmed its view that the currency will gain this year. The euro fell 0.7 percent to 129.28 yen. Japan’s currency was little changed at 99.94 per dollar. Canada’s currency slid 0.2 percent to C$1.0521.

Copper dropped 0.8 percent and West Texas Intermediate oil fell 0.1 percent to $101.12 a barrel. European Union carbon allowances for December declined 3 percent after rallying 9.3 percent yesterday when the EU approved a new trading system.

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