Oil Climbs With Emerging-Market Assets as U.S. Stocks, Yen Fall

  • WTI tops $43 as OPEC chief sees rebound out of bear market
  • Asian index futures mixed after S&P 500 ends day down 0.1%

Rabobank's Foley: Retail Sales Data Is Key

Oil climbed with emerging-market assets on optimism central-bank stimulus and a strengthening U.S. economy will sustain global growth. American stocks fell.

Crude led gains in commodities after OPEC’s president said the current bear market would be short-lived, while zinc and nickel drove industrial metals higher. Global shares rose to a one-year high after the U.K. started its expanded bond-buying program and as bets on the Federal Reserve raising interest rates in 2016 hovered below 50 percent. Health-care shares led the S&P 500 Index down from a record high, while the yen extended losses.

Evidence the U.S. labor market is on a more solid footing bolstered confidence in the world’s largest economy, fueling appetite for commodities and developing-nation assets. But while odds on a Fed hike this year have ticked higher, policy makers are still expected to only move gradually. Last week’s better-than-expected jobs data helped revive speculation that the U.S. could be tightening policy as other nations add stimulus to boost their flagging economies.

“Coming off Friday’s strong numbers, investors have been given another chance to embrace risk assets,” said Bill Schultz, who oversees $1.2 billion as chief investment officer of McQueen, Ball & Associates Inc. in Bethlehem, Pennsylvania. “The dovish tone from central banks overseas is pushing money into those types of assets as well.”

For more on how the Fed is situated amid global monetary policy, click here.

Commodities

West Texas Intermediate crude futures advanced 2.9 percent to $43.02 a barrel, after tumbling more than 20 percent into a bear market last week.

Members of the Organization of Petroleum Exporting Countries are in “constant deliberations” on stabilizing the market and prices are expected to rise in the latter part of 2016, Mohammed bin Saleh Al-Sada, Qatar’s energy minister and holder of OPEC’s rotating presidency, said on the group’s website.

“This is a very formal announcement to an informal meeting and that has bullish implications,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. “The statement said OPEC expects the market to be balanced before long, and that the group believes the drop in prices is temporary.”

Zinc and other base metals advanced as signs of resilience in both the German and American economies outweighed concerns over demand in China. Gold retreated as prospects for higher U.S. rates reduced demand for precious metals as a haven.

Stocks

The MSCI All Country World Index extended its advance in to a third day, gaining 0.3 percent as a gauge of emerging-market stocks rose 1.1 percent.

The S&P 500 fell 0.1 percent in New York, dropping for the first time in four days as losses in health-care and consumer companies overshadowed gains in energy shares. Even as the gauge sits near a record high, analyst forecasts for corporate results in the three months ending in September just turned negative for a sixth straight quarter.

“Over time, earnings growth is what we need to see, yet what we’re seeing is more of a treading of water,” said Kevin Caron, a Florham Park, New Jersey-based market strategist and portfolio manager who helps oversee $180 billion at Stifel Nicolaus & Co. “That’s still preferable to a sharp earnings contraction, but it also leaves investors wanting more.”

Trading volume on the Stoxx Europe 600 Index was 37 percent below the 30-day average, with the gauge closing little changed. Barclays Plc rallied after Exane BNP Paribas raised the lender’s recommendation to the equivalent of buy. BHP Billiton Ltd. and Anglo American Plc pushed miners higher. Airbus Group SE retreated after saying the U.K. Serious Fraud Office has opened a criminal investigation into allegations of fraud, bribery and corruption relating to some of the planemaker’s third-party consultants.

South Korea’s Kospi index climbed to the highest level since November after S&P Global Ratings elevated the country’s credit rating. Japan’s Nikkei 225 Stock Average led gains among the world’s developed-nation stock markets, jumping 2.4 percent on Monday.

Futures on Asian stock indexes signaled a mixed day ahead, with contracts on the Kospi down 0.1 percent in most recent trading, while yen-denominated Nikkei 225 futures climbed 1.4 percent in Chicago.

Currencies

The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, was little changed after climbing 0.7 percent over the previous three days.

Goldman Sachs Group Inc. is telling clients to buy the dollar on prospects the market is underpricing the chance of a Fed rate increase. Goldman says the likelihood of higher borrowing costs by year-end is 75 percent, while the futures market is pricing in 47 percent odds.

The yen weakened 0.6 percent to 102.45 per dollar, its steepest one-day drop since July 27, as optimism around the global outlook and the U.S. economy damped demand for the haven currency. Hedge funds also cut bullish bets on the yen to the least in two months.

The pound capped its longest losing streak since the U.K.’s decision to leave the European Union as the Bank of England started its expanded monetary easing program.

The ruble and the Colombian peso led gains among emerging-market currencies, spurring MSCI’s EM Currency Index up 0.2 percent in a third straight day of gains. Brazil’s real declined on reports Acting President Michel Temer was linked to illegal donations.

Bonds

Ten-year Treasury yields were little changed at 1.59 percent Monday, after jumping nine basis points Friday after the better-than-expected payrolls data.

Fed officials have pared projections on rates twice in 2016 as they seek to tighten policy against a tide of monetary easing abroad. Strategists at Morgan Stanley say traders will price in a higher likelihood of a hike as the Fed’s Sept. 20-21 meeting approaches.

“While we would caution against too closely associating this payroll report with the chance of a hike in September, we wonder whether investors will be able to help themselves,” strategists led by Matthew Hornbach, Morgan Stanley’s head of global interest-rate strategy, wrote in a research note. “We think investors will put higher odds on a September rate hike than current market pricing suggests.”

Five- and 10-year bond yields in the U.K. dropped to record lows as markets digested the BOE’s plan to reinvigorate the economy in the wake of the June 23 Brexit vote. Spanish government bonds advanced, pushing the 10-year yield below 1 percent for the first time.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE