European stocks advance as euro, gold weaken
Stocks traders put declines in Asia behind them as European markets rose with US index futures and commodities.
Government bonds fell, gold slid and the euro weakened. European shares advanced for the first time in three days on speculation the region's central bank will ramp up monetary stimulus on Thursday. Miners and banks led gains as a gauge of raw materials rebounded from its biggest selloff in a month, buoyed by gains in oil and copper. A selloff in Japanese government bonds dragged Treasuries and German bunds lower, gold fell a second day and the euro dropped versus most of its major peers.
Economists surveyed by Bloomberg forecast that the ECB will deliver a package of easing measures in its attempts to bolster price growth. That's offering support to European markets after a slide in China's exports tempered a three-week rally that had restored almost $5 trillion to the value of equities worldwide. The International Monetary Fund said Tuesday that volatile financial markets and low commodity prices are heightening risks for the global economy, while DoubleLine Capital's Jeffrey Gundlach said betting on stocks is a "big losing proposition."
"There's talk of rates cuts, increasing the size of the asset-purchase program, and expanding the range of products that the ECB will buy," said Daniel Murray, the London-based head of research at EFG Asset Management. "Let's see tomorrow how good Draghi is at playing the market: he has built up expectations before and found them hard to meet."
The Stoxx Europe 600 Index rose 0.6 percent at 9:45 a.m. London time. French lender Credit Agricole SA advanced 2.6 percent as it announced plans to boost annual profit to more than 4.2 billion euros ($4.6 billion) in 2019. Inditex SA, the world's biggest clothing retailer, gained 2.2 percent after reporting its fastest earnings growth in three years. Futures on the Standard & Poor's 500 Index advanced following the benchmark's biggest drop in two weeks, gaining 0.3 percent. The gauge has about 2 percent upside and 20 percent downside, making for a lousy risk-reward trade-off, according to money manager Gundlach, who runs the $56 billion DoubleLine Total Return Bond Fund. The recent rebound was a "bear market rally," he said.
Asian markets showed less optimism than those in Europe. The MSCI Asia Pacific Index lost 0.3 percent as measures of materials and energy stocks sank about 1.3 percent. Jiangxi Copper Co. -- China's biggest smelter -- tumbled 5.5 percent in Hong Kong, trimming this month's advance to 18 percent. Japan's Topix dropped for a third day, led by shipping stocks after Mitsubishi UFJ Morgan Stanley lowered price targets for the sector's three biggest companies. The Shanghai Composite Index slid 1.3 percent.
"As much as I would like to agree with the positive sentiment, several key macro headwinds remain on point and the drivers of the past week are now showing signs of topping out," Evan Lucas, a markets strategist in Melbourne at IG Ltd., said in an email to clients. "Markets will remain volatile and trade in a directionless manner." The euro fell 0.4 percent to $1.0971 and slid 0.5 percent to 123.45 yen. Japan's currency, which typically moves in the opposite direction to the nation's stocks, is the best performer among major peers this year.
South Korea's won led declines among Asian currencies, dropping 0.8 percent against the dollar. The nation's central bank will review monetary policy on Thursday and seven out of 18 economists surveyed by Bloomberg forecast the benchmark interest rate will be cut from a record-low 1.5 percent. Canada decides on interest rates on Wednesday, and New Zealand's central bank also has a policy meeting this week.
Crude oil rose 1.2 percent to $36.95 a barrel in New York, after a 3.7 percent slide on Tuesday that marked its biggest loss in almost four weeks. U.S. inventories climbed by 4.4 million barrels last week, the industry-funded American Petroleum Institute was said to report. Government data Wednesday is forecast to also show supplies increased, keeping stockpiles at the highest level in more than eight decades.
Nickel rebounded 2.4 percent after tumbling 8.5 percent on Tuesday. Copper gained 1.1 percent. Copper demand won't catch up with supply until 2017, according to a senior official at Freeport-McMoRan Inc., the largest publicly traded producer of the metal. Gold fell 0.3 percent, extending Tuesday's retreat from a one-year high. The Bloomberg Commodity Index rose 0.4 percent, after a 1.1 percent loss in the last session. It's dropped 22 percent in the past year.