Oil Halts Decline as Emerging Market Stocks Climb on China

  • S&P 500 gains 2nd day to pare its worst December in 13 years
  • Oil rebounds from six-year low before inventories data

Emerging Markets and the Globalization of Business

Treasuries fell and U.S. stocks advanced as data showed consumer spending buoyed the American economy in the third quarter amid signs of slowing growth overseas. Oil halted declines and emerging-market equities gained for a second day on the prospect of more stimulus from China.

The Standard & Poor’s 500 Index rose for a second day after gross domestic product climbed at a revised 2 percent annualized rate last quarter. Trading on U.S. exchanges was 13 percent below the three-month average. Ten-year Treasury rates added four basis points to 2.24 percent, as the notes declined for the first time in four days. West Texas Intermediate rose above $36 a barrel, bolstering the currencies of commodity producing nations.

Energy a 'Great Play,' Oil Has Upside, Naeimi Says

“We’ve got some good numbers in front of us, but we need to see if money comes back into the market,” said Larry Rosenthal, who oversees $600 million as president of Rosenthal Wealth Management Group. “We’re in a rate rising cycle and all eyes are going to be on earnings and on true economic data. If oil continues to stay down it will add volatility to the marketplace but it’s not going to hurt all sectors.”

The GDP report showed household purchases propelled demand last quarter, while net exports weakened amid slower overseas growth and a strong dollar. The S&P 500 is headed for its worst year since 2008, with investors concerned that waning expansion in China will harm global growth just as the U.S. ends seven years of zero-percent interest rates. Sentiment was buoyed Tuesday as crude halted a four-day slide and China signaled late Monday that monetary policy must be more “flexible.”

Stocks

The S&P 500 added 0.9 percent at 4 p.m. in New York. The index has fallen 2 percent this month, historically its second-best of the year after July. After rebounding as much as 13 percent from its summer low through early November, the gauge has retreated, leaving it lower by 1 percent in 2015.

The Stoxx Europe 600 Index slipped 0.1 percent, extending its monthly loss to 7.4 percent. It’s on track for the worst December since 2002. The volume of shares traded was 32 percent lower than the 30-day average.

Bonds

U.S. 10-year Treasuries halted a three day advance after the yield dropped 10 basis points following the Fed’s first rate increase in almost a decade. Trading was light before the Christmas holiday. The Securities Industry and Financial Markets Association recommends an early close for U.S. bond markets Thursday and a full closure on Friday.

Global bonds are poised to outperform stocks globally for a second year, the first time that has happened in more than a decade, as slowing growth in China drives demand for the safest assets.

In Europe, German benchmark 10-year bunds fell, pushing the yield up five basis points to 0.60 percent. The yield on similar-maturity Spanish bonds rose three basis points to 1.78 percent, after rising eight basis points on Monday.

Commodities

West Texas Intermediate futures for February added 1.1 percent to $36.19 a barrel in New York. Brent oil futures dropped 0.4 percent to $36.21 after the grade fell to as low as $36.04 on Monday, the least since July 2004.

Oil is “slightly higher, partly on some profit-taking,” said Hans van Cleef, senior energy economist at ABN Amro Bank NV in Amsterdam. There “may be some upside potential ahead of the inventories, but if we see another inventory build then prices could drop some more”

Oil inventories probably rose by 1 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. That would keep supplies about 130 million barrels above the five-year seasonal average.

The Bloomberg Commodity Index fell 0.7 percent after a two-day increase. Gold for immediate delivery fell 0.5 percent to $1,072.6 an ounce, according to Bloomberg generic pricing.

Nickel led declines in industrial metals, falling as much as 2.8 percent to $8,639 a ton on the London Metal Exchange. Copper, lead and zinc also fell.

Emerging Markets

A gauge of 20 emerging-market currencies rose for a third day, the longest streak since Nov. 20. Turkey’s lira dropped after the central bank unexpectedly kept interest rates on hold. Indonesia’s rupiah climbed the most among the 24 developing-nation currencies tracked by Bloomberg after the government announced its eighth policy package.

“We’ve had easing on multiple fronts in China and we are starting to see the green shoots of recovery there,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors Ltd., which oversees about $114 billion. “We should see China’s economy turn the corner in 2016."

Currencies

New Zealand’s dollar jumped 0.6 percent to 68.06 U.S. cents while Australia’s rose 0.6 percent to 72.31 U.S. cents after the Chinese policy announcement. China is the biggest trading partner of both nations.

A gauge of the dollar is set to drop in December by the most in eight months as investors bet the Federal Reserve will wait until at least April to raise interest rates again after last week’s first increase in almost a decade. The U.S. Dollar Index, which tracks the currency against major peers, has dropped 2 percent this month, heading for the biggest slump since April.

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