Europe Stocks Rise as Gold Drops While Krona, Aussie Fall

July 3, 2014

Frankfurt (July 3)  European stocks stayed higher, rising for a third day, as euro-area policy makers left interest rates unchanged before U.S. payrolls data. Gold fell, while Sweden’s currency tumbled the most since 2011 after the central bank cut borrowing costs by more than analysts estimated.

The Stoxx Europe 600 Index added 0.4 percent 7:45 a.m. in New York. Standard & Poor’s 500 Index futures increased 0.1 percent after the gauge closed at a record. Gold retreated 0.6 percent and silver declined 0.8 percent. The krona slid 1.8 percent to 9.3225 per euro and Swedish 10-year bond yields dropped three basis points to 1.85 percent. The Aussie slid 0.7 percent versus the dollar after Reserve Bank Governor Glenn Stevens said the currency was “overvalued” by most measures.

The European Central Bank kept rates unchanged after President Mario Draghi enacted unprecedented stimulus last month. The monthly payrolls report comes after ADP Research Institute data yesterday showed U.S. employment rose in June by the most since 2012, with more workers hired than economists projected.

“It’s hard to say we expect much more from the ECB,” said Tobias Britsch, who helps oversee about $33 billion at Meriten Investment Management GmbH, in Dusseldorf, Germany. “Draghi can keep the markets happy with words and promises that he will act if needed, but in the end he hasn’t really been forced to do so quite yet. He has convinced the market so far.”
The yield on 10-year Treasury notes was little changed at 2.63 percent. It climbed to as much as 134 basis points more than the rate on German bunds yesterday, a 15-year high, reflecting the outlook for higher U.S. interest rates relative to Europe.

Draghi Outlook

The ECB left its benchmark interest rate at 0.15 percent as predicted by all of the 54 economists surveyed by Bloomberg News. Draghi speaks to the press 45 minutes after the announcement. Stocks rallied on June 5 after the central bank announced new measures to stimulate lending and said it would begin preparations related for an asset-purchase plan.

The krona fell at least 1 percent against its 16 major peers. Sweden’s Riksbank cut its benchmark rate by 50 basis points to 0.25 percent, while economists had predicted a 25 basis-point reduction. The euro was little changed at $1.3652.

‘Massively Dovish’

Sweden’s rate decision “was massively more dovish than what most people in the market expected,” said Carl Hammer, chief foreign-exchange strategist at SEB AB in Stockholm. The Riksbank wants “to engineer a weaker currency,” he said. “If you deviate a lot from global monetary policy and try to run your own independent monetary policy, you run the risk of a stronger currency.”

Three shares rose for every one that declined in the Stoxx 600, with trading volume 33 percent higher than the 30-day average, according to data compiled by Bloomberg.

Ingenico Group climbed 7.6 percent after the French maker of payment terminals said it’s in talks to acquire online payment-service provider GlobalCollect. K+S AG advanced 2.2 percent after Europe’s largest potash supplier said it will expand its specialty-fertilizer and salt businesses.

Balfour Beatty Plc sank 6.8 percent after the British construction company said some parts of the U.K. construction business have weakened further. Randstad Holding NV (RAND) lost 2.9 percent after Bank of America Corp. lowered its rating on the biggest Dutch staffing company.

Payrolls Rising

In the U.S., Labor Department data at 8:30 a.m. in Washington will probably show employers added 215,000 workers in June and the jobless rate held at an almost six-year low of 6.3 percent, according to a Bloomberg News survey. Another report from the Institute for Supply Management may show services industries, which make up almost 90 percent of the world’s largest economy, expanded last month.

S&P 500 futures expiring in September were little changed today, after the index closed at a record. It’s almost tripled since its March 2009 low. The Dow Jones Industrial Average also rallied to an all-time high yesterday.

Source: Bloomberg

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