Global Stocks Rise on Economy as Metals Advance on China

July 24, 2014

New York (July 24)  Stocks rose around the world after stronger manufacturing while the ruble weakened for the first time in three days on the threat of more sanctions. Hong Kong stocks, the yuan and industrial metals gained on China orders.

The MSCI All-Country World Index advanced 0.1 percent by 8:07 a.m. in New York and futures on the Standard & Poor’s 500 Index rose 0.2 percent. The ruble weakened 0.3 percent. The Hang Seng Index climbed 0.7 percent to the highest close since April 2011, while the yuan added 0.1 percent and copper rallied 1.5 percent. Gold fell 0.5 percent. New Zealand’s dollar slid the most in nine months as the nation’s central bank said the currency’s strength is unjustified. German bonds declined.

Reports showed euro-area manufacturing and services grew this month while Chinese factory activity rose to an 18-month high in July. U.S. new home sales probably fell in June after rising the most in 22 years in May, economists said before data from the Commerce Department today. Inc. and Starbucks Corp. are due to report earnings.

“The better data out of China and Europe has added more to the pro-risk mood,” said Alvin T. Tan, the director of foreign exchange strategies at Societe Generale SA in London. “The U.S. earnings season by and large has come out better than expected so that’s why the stock market keeps pushing to new highs.”

The Stoxx 600 advanced 0.5 percent after adding 1.5 percent in the past two days, ending at a one-week high. The gauge closed 2 percent away from its six-year high on June 10.

Facebook Rallies

Facebook Inc. (FB) climbed 9.7 percent in early New York trading after the social network said second-quarter sales surged 61 percent and net income more than doubled, exceeding analysts’ projections. Mobile promotions accounted for 62 percent of ad sales, up from 59 percent in the prior period.

Gauges of banks advanced the most among 19 industry groups in the Stoxx 600 today.

Danske Bank A/S advanced 5.3 percent after Scandinavia’s second-largest lender by assets delivered its best quarterly result since 2008. Banco Comercial Portugues SA climbed 7 percent after Banco de Sabadell SA raised its stake to 5.53 percent.

Nokia Oyj jumped 7.7 percent after the Finnish network-equipment maker boosted its profitability forecast.

“Most investors are too pessimistic,” Herbert Perus, who helps oversee $36 billion as head of equities at Raiffeisen Capital Management in Vienna, said in a phone interview. “Any good data will force them back into the markets to cover their short positions.”

Kingfisher, BASF

Kingfisher Plc (KGF) lost 7.3 percent after Europe’s largest home-improvement retailer said second-quarter sales fell more than analysts expected. BASF SE dropped 1.7 percent after the chemicals maker reported earnings that missed estimates.

EasyJet Plc dropped 5.5 percent after Europe’s second-biggest low-cost airline forecast an annual pretax profit that fell short of analysts’ estimates.

The volume of shares listed on the Stoxx 600 changing hands was 24 percent greater than the 30-day average, data compiled by Bloomberg show.

The S&P 500 rose 0.2 percent yesterday for a second daily increase.

About 77 percent of those that have posted results this season have beaten analysts’ estimates for profit, while 65 percent exceeded sales projections, according to data compiled by Bloomberg.

S&P Profits

Profits at S&P 500 members probably rose 6.2 percent in the second quarter, while sales gained 3.3 percent, according to analyst estimates compiled by Bloomberg.

Qualcomm Inc. (QCOM) lost 5 percent after the biggest maker of mobile-phone chips forecast fiscal fourth-quarter profit that may fall short of analysts’ estimates, citing challenges to its technology-licensing business in China. The MSCI AC Asia Pacific Index (MXAP) rose 0.1 today, climbing to its highest level since June 2008.

Copper rose to $7,156 a metric ton. Zinc rallied as much as 1.2 percent to $2,394 a ton, the highest since August 2011. Gold declined for a third day to $1,297.75 an ounce.

China’s Manufacturing

A preliminary Purchasing Managers’ Index for China, the biggest consumer of industrial metals, rose to 52, exceeding the 51 median estimate of analysts in a Bloomberg survey, according to a report by Markit and HSBC Holdings Plc.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong climbed 1.1 percent to a seven-month high. The Shanghai Composite Index added 1.3 percent.

Russian bonds fell, with the yield on the February 2027 security rising seven basis points to 9.11 percent. Separatists shot down two Ukrainian jets in the same region where a Malaysian Air plane was destroyed, the government said, as the European Commission prepared proposals for stepped-up penalties against Russia.

Sanctions to be considered today may include a ban on Europeans buying new debt or stock issued by Russia’s biggest banks, the Financial Times reported, citing a proposal it has seen.

The cost of insuring against losses on Russian sovereign debt rose, with credit-default swaps climbing five basis points to 212 basis points, the highest since July 21, according to CMA. That compares with 166.5 basis points on July 9.

Russian Debt

A total of 10,031 credit-default swap contracts covering $9.7 billion of Russia government debt were outstanding as of July 18, according to the Depository Trust & Clearing Corp. That’s up from about $5.5 billion at the start of the year.

The Micex Index of stocks was little changed after losing as much as 0.9 percent.

The cost of insuring against losses on European corporate debt fell, with the Markit iTraxx Europe index of credit-default swaps on 125 investment-grade companies decreasing 0.5 basis point to 60 basis points, the lowest since July 16.

The kiwi weakened by at least 0.7 percent against all 16 of its major peers. It slid 1.2 percent to 85.94 U.S. cents, its biggest decline since October, and touched 85.68, the lowest since June 12. Reserve Bank Governor Graeme Wheeler said the currency’s level is “unjustified and unsustainable” and signaled a pause after the fourth interest-rate increase this year.

Government Bonds

German 10-year yields rose two basis points to 1.17 percent and the rate on similar-maturity U.K. gilts increased three basis points to 2.58 percent.

Italian 10-year yields dropped for a 10th day in the longest run since 2005, with the yield touching 2.71 percent, the lowest since June 10.

A gauge of global bonds extended its advance to the highest level in 14 months after the International Monetary Fund said the Federal Reserve may keep interest rates near zero for longer than investors anticipate. The Bank of America Merrill Lynch Global Broad Market Index rose to the most since May 2013.

Source: Reuters

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