European Bonds Rise on Factory Data; Ruble at Record Low

Italian and Portuguese government bonds rose as a report showing slowing growth in factory output boosted the case for more central bank stimulus. Emerging-market stocks gained as investors speculated China will take steps to bolster the economy, while Russia’s ruble weakened to a record.

Italy’s 10-year yield dropped two basis points to 2.42 percent at 4:32 p.m. in New York, while the yield on Portugal’s 10-year bonds fell three basis points to 3.19 percent. Spain sold 50-year government bonds for the first time after its benchmark bond yields fell to records. The MSCI Emerging Markets Index added 0.3 percent, extending a third week of gains. Standard & Poor’s 500 Index futures were little changed with U.S. markets closed for the Labor Day holiday. Russia’s currency slid 0.5 percent against the dollar.

Bets that European Central Bank policy makers will continue to support economies were boosted as euro-area manufacturing output expanded less than estimated in August, with activity contracting in Italy. An official Chinese gauge of production fell for the first time since February. European Union governments vowed over the weekend to impose more sanctions on Russia should the conflict with Ukraine worsen.

“The ECB will try to comfort investors that it’s really committed to anchoring inflation expectations,” said Jean Medecin, a London-based member of the investment committee at Carmignac Gestion SA, which oversees about 50 billion euros ($66 billion) in assets. “There is a possibility for an additional rate cut. We don’t expect the ECB to commit to some form of large-scale quantitative easing this week.”

ECB Meeting

Five economists forecast the ECB will cut the refinancing rate by 10 basis points, or 0.10 percentage point, to 0.05 percent at its Sept. 4 meeting in Frankfurt, while the remaining 50 predict no change, according to Bloomberg surveys. European money markets are pricing in around a 50 percent probability the European Central Bank will cut its refinancing and deposit rates by 10 basis points this week, BNP Paribas SA said.

The Stoxx Europe 600 rose 0.3 percent following a 1.8 percent advance in August. Twelve of the 19 industry groups in the Stoxx 600 rose.

A euro-area Purchasing Managers’ Index fell to 50.7 last month from 51.8, London-based Markit Economics said today, less than the Aug. 21 preliminary reading of 50.8. A French gauge of manufacturing signaled the sharpest decline since May 2013, while a measure for Italy showed contraction after 13 months of expansion. Activity slowed in Spain, Holland and Germany.

The Spanish Treasury sold 1 billion euros ($1.3 billion) of 2064 securities bearing a 4 percent coupon in a private placement, it said today in a statement. The yield on French two-year notes dropped below zero for first time today.

The MSCI All-Country World Index was little changed after climbing 2 percent last month, the most since February. The MSCI AC Asia Pacific Index rose 0.1 percent, rebounding from its biggest monthly decline since January.

China Factories

The purchasing managers’ index from the China Federation of Logistics and Purchasing dropped to 51.1 for August. Economists surveyed by Bloomberg projected a decline to 51.2, from 51.7 in July. A level above 50 signals expansion.

The Shanghai Composite Index climbed 0.8 percent, while the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost less than 0.1 percent.

India’s S&P BSE Sensex jumped 0.9 percent to a record. The economy grew 5.7 percent last quarter from a year earlier, the most in more than two years, a report showed Aug. 29.

The Ibovespa fell 0.2 percent, erasing earlier gains of as much as 1.6 percent as investors weighed the country’s political outlook before next month’s presidential election.

The ruble weakened as much as 1 percent to 37.51 per dollar. The Micex Index dropped 0.6 percent. Ukraine’s Eurobond due July 2017 fell, sending the yield 10 basis points higher to 12.8 percent, a 3 1/2-month high.

New Sanctions

Pro-Russian rebels attacked two Ukrainian coast-guard vessels, just hours after EU governments agreed to impose new sanctions on Russia if the conflict worsens.

Dubai stocks gained for a second day, with Emaar Properties PJSC climbing 4.5 percent to the highest since January 2008. The Dubai-based developer plans to sell at least 15 percent of its mall unit in September and distribute 5.3 billion dirhams ($1.44 billion) of the proceeds as a dividend.

The yen weakened against most of its 16 major counterparts. The Japanese currency declined for a second day versus the dollar, depreciating 0.2 percent against the dollar and per euro.

West Texas Intermediate crude for October delivery fell 0.1 percent to $95.86 a barrel in electronic trading on the New York Mercantile Exchange. Copper in London dropped 0.6 percent to $6,942 a metric ton.

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