Equities Rise as Oil Jumps to 15-Month High; Loonie Erases Gains

  • Crude climbs on unexpected drop in U.S. supply, OPEC optimism
  • Asian index futures outside Japan advance before third debate

China 3Q GDP Remains Steady at 6.7% on Year

Stocks extended gains as oil’s surge to its highest price since July last year spurred a rally in energy producers from Exxon Mobil Corp. to Royal Dutch Shell Plc. The dollar retreated.

Global equities posted their steepest back-to-back advance in a month as traders sifted through corporate earnings for clues as to the health of the world economy. Crude jumped on data showing a surprise decline in U.S. inventories and as Saudi Arabia said many nations are willing to join OPEC in cutting output. Treasuries snapped an advance as a $17.5 billion planned Saudi bond sale -- the largest ever from a developing nation -- weighed on sovereign debt markets. The Canadian dollar reversed gains after the nation’s central bank chief said policy makers have “actively” discussed the possibility of more stimulus.

Equities ended Wednesday higher after struggling to find direction earlier in the session amid a mood of political and economic uncertainty. Hillary Clinton and Donald Trump will go head-to-head in the final U.S. presidential debate as traders count down to the election and the next Federal Reserve meeting, which is just two weeks away. A Bloomberg Politics national poll shows a nine-point lead for Clinton. The U.S. economy maintained a steady pace of growth between late August and early October, as a tight labor market and nascent wage pressures contributed to a “mostly positive” outlook, according to the Fed’s Beige Book.

“It has been a market that has lacked leadership to a certain extent, so we’re looking to financials and energy,” said Yousef Abbasi, a global market strategist in New York at JonesTrading Institutional Services LLC. “We did get a number of earnings so that will continue to be the focus.”

Stocks

MSCI’s All-Country World Index rose 0.4 percent as of 4:15 p.m. in New York, bringing its two-day advance to 1.2 percent.

Meanwhile, the S&P 500 Index added 0.2 percent to 2,144.29, after gaining the most in two weeks on Tuesday. Morgan Stanley and Halliburton Co. rallied on better-than-estimated results, while the Nasdaq Composite Index closed up just 0.1 percent as Intel Corp.’s disappointing sales outlook drove chipmakers lower.

European stocks erased losses as Zalando SE and Carrefour SA led the region’s retailers higher after the German online company raised its profitability forecast and the French grocer reported sales that beat projections. ASML Holding NV, Europe’s largest semiconductor-equipment maker, climbed after forecasting fourth-quarter profit that was above analysts’ expectations. Automakers climbed amid a weaker euro.

Shares of developing nations posted the biggest back-to-back gain in about four weeks.

In Asia, futures on equity measures outside of Japan rose, foreshadowing a third day of gains for MSCI’s Asia-Pacific benchmark. Contracts on indexes in Australia, South Korea and Hong Kong climbed at least 0.2 percent, while futures on the Nikkei 225 Stock Average fell 0.1 percent in Osaka amid gains in the yen.

Commodities

West Texas Intermediate crude for November delivery, which expires Thursday, rose 2.6 percent to settle at $51.60 a barrel on the New York Mercantile Exchange, the highest level since July 2015. The more-active December contract climbed $1.20, or 2.4 percent, to end the session at $51.82 a barrel.

Brent for December settlement advanced 99 cents, or 1.9 percent, to settle at $52.67 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark traded at a 85-cent premium to December WTI.

Nationwide crude supplies dropped by 5.25 million barrels to the lowest level since January in the week ended Oct. 14, the Energy Information Administration reported Wednesday. Analysts surveyed by Bloomberg had forecast a 2.1 million-barrel increase. OPEC can continue to stabilize the market and other nations have given “strong signals” they will cooperate, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said in London.

“It’s a big draw - it’s a bit of surprise for the market because we are also in peak turnarounds and that’s what makes it so impressive,” Amrita Sen, chief oil economist for Energy Aspects Ltd. in London, said by phone. “If then, on top of this, the OPEC cuts do materialize, our view is that we can see $60 by year end this year. A lot depends on what happens between now and November 30.”

Gold and silver advanced amid the dollar’s retreat, while tin, zinc and lead all jumped at least 1 percent in London.

Currencies

The Bloomberg Dollar Spot Index, which measures the U.S. currency against 10 major counterparts, fell for a third straight day, declining 0.1 percent after reaching its highest level since March last week. The dollar fell 0.4 percent to 103.44 yen, and lost at least 0.5 percent to the currencies of Australia, New Zealand, Brazil and South Korea.

Mexico’s peso -- which has evolved into a barometer on the fortunes of Trump’s campaign -- climbed 0.5 percent to a six-week high.

The Canadian dollar weakened 0.1 percent, reversing a rally of much as 0.8 percent. The currency initially gained after the BOC held the benchmark interest rate at 0.5 percent and its policy statement dropped a reference to downside inflation risks that featured in its previous stance from September. The markets then did an abrupt u-turn after Governor Stephen Poloz said policy makers discussed monetary easing “in order to speed up the return of the economy to full capacity.”

“The fact that they considered a rate cut is significant,” said Mazen Issa, a senior foreign-exchange strategist at Toronto-Dominion Bank in New York. “It could be more bark than bite, but nonetheless, the signaling effect is important.”

Bonds

Longer-dated Treasuries lagged behind with Saudi Arabia set to sell the dollar-denominated bonds as a way of shoring up finances battered by oil’s drop over the past two years. The deal comes as companies including Wells Fargo & Co. and Mondelez International Inc. sell debt, putting U.S. corporate bond sales on track for their busiest week in a month, with issuance set to top $25 billion.

“Anytime you see a big new issuer coming in, there’s a potential for crowding out,” said George Goncalves, head of U.S. interest-rates research at Nomura Securities, one of 23 primary dealers that trade with the Fed. “It doesn’t help the Treasury market, that’s for sure.”

Treasuries have slumped in October as a bond-market gauge of inflation expectations climbed to the highest level since May. In a speech at a Boston Fed conference last week, Chair Janet Yellen laid out the argument for keeping monetary policy easy while hinting at letting the economy run hot. Traders see a rate hike this year as an odds-on proposition, even if markets are also pricing in a gradual pace of future increases.

Ten-year Treasury yields rose by one basis point to 1.75 percent, after declining six basis points over the previous two days, according to Bloomberg Bond Trader data.

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