S&P 500 Advances With European Stocks as Bonds Drop on Ukraine

Monday, 18 Aug 2014 11:59 AM

 

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The Standard & Poor’s 500 Index rose with European stocks, while crude oil and bonds slipped as diplomats from Ukraine and Russia discussed a possible truce and Kurdish forces made progress against militants in Iraq.

The S&P 500 advanced 0.8 percent at 11:13 a.m. in New York, while the Stoxx Europe 600 Index rose 1.1 percent. Brent crude declined to a 14-month low and gold fell for a second session. Ten-year Treasury yields rose four basis points and rates on similar-maturity German and U.K. debt climbed more than five basis points. The pound gained after the Bank of England governor spoke about the interest-rate outlook.

Ukraine and Russia made some progress in “difficult” talks in Berlin, according to German Foreign Minister Frank-Walter Steinmeier, while his Russian counterpart said the meeting is yet to produce a resolution. Kurdish forces retook control of Iraq’s largest dam. Federal Reserve-meeting minutes are due and central bank officials meet in Jackson Hole, Wyoming, later this week.

“Every time you have a de-escalation of geopolitical risk it works favorably to the market,” Steen Jakobsen, chief investment officer at Saxo Bank A/S in Copenhagen, said by phone. “The short-term direction of the stock market at the moment is driven almost entirely by whatever news is coming out of the Ukraine, Russia situation. I see this as a temporary relief.”

Ukrainian Foreign Minister Pavlo Klimkin met his Russian counterpart Sergei Lavrov for more than five hours of talks in Berlin, as they sought to ease tension after officials in Kiev said troops had partially destroyed an armed convoy from Russia.

Global Conflicts

The S&P 500 fell as much as 3.9 percent from a record reached on July 24 amid growing concern over global conflicts from Ukraine to Gaza and Iraq. The benchmark index gained 1.2 percent last week as data showing an uneven economic recovery boosted speculation that the Federal Reserve won’t raise rates sooner than anticipated.

The central bank remains on pace to wind down its monthly bond purchases in October, while Fed Chair Janet Yellen has said officials will keep its benchmark interest rate low for a “considerable time” after that. The central bank releases minutes from its July meeting on Aug. 20.

Clothing retailer Urban Outfitters Inc. is reporting earnings today. About 76 percent of S&P 500 companies that have posted results this season have beaten analysts’ estimates for profit, while 65 percent exceeded sales projections, according to data compiled by Bloomberg.

Among U.S. stocks moving today, Dollar General Corp. surged 9.7 percent after offering $9.7 billion for Family Dollar Stores Inc. Family Dollar rallied 4.7 percent. An S&P index of housing stocks jumped 1.7 percent as confidence among homebuilders rose in August to the highest level in seven months. Delta Air Lines Inc. rose 2.3 percent, while Southwest Airlines Co. added 2.4 percent on falling oil prices.

The Stoxx 600 climbed today after rising 1.5 percent last week as reports showed the euro area’s recovery stalled in the second quarter, spurring speculation the European Central Bank will boost stimulus measures.

Europe Stocks

All 19 industry groups in the gauge rose today, with automakers advancing the most. United Internet AG added 3.8 percent after buying a 10.7 percent stake in Rocket Internet AG. Roche Holding AG increased 1 percent after people familiar with the matter said the drugmaker is in talks to buy the stake in Japan’s Chugai Pharmaceutical Co. that it doesn’t already own.

Neste Oil Oyj fell 1.2 percent after the Finnish company said production will fall at one of its refineries.

Brent for October settlement dropped 1.9 percent to $101.58 a barrel in London. West Texas Intermediate crude slipped 1.2 percent to $96.17 per barrel in New York, extending last week’s 0.3 percent drop, its fourth straight weekly loss.

Iraqi and Kurdish forces retook control of the Mosul Dam, Iraqiya television reported, citing military spokesman Qassem Ata. The U.S. widened its airstrikes in Iraq over the weekend to help secure the dam near Mosul, Iraq’s largest northern city, after it was seized by Islamist militants. Iraq is OPEC’s second-biggest oil producer.

Precious Metals

Gold dropped 0.5 percent to $1,299.40 an ounce in New York. Silver climbed 0.4 percent to $19.595 an ounce, after last week declining for a fifth consecutive week. Palladium rose 0.5 percent to $899.25 an ounce, after earlier reaching $902.09, the highest since February 2001.

The MSCI Emerging Markets Index added 0.2 percent, after the biggest weekly gain since March. India’s S&P BSE Sensex index advanced for a fifth day, adding 1 percent, while Russia’s Micex index gained 0.5 percent for a seventh day of advances, the longest winning streak in 11 months.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong declined 0.4 percent, while the Shanghai Composite Index gained 0.6 percent. New-home prices fell in 64 of 70 cities in July from a month before, according to China’s statistics bureau.

Government Bonds

Yields on 10-year Treasurys rose after falling the past three trading days, including a six basis-point drop Aug. 15. Inflation in the U.S. probably slowed to 2 percent in July from a year earlier, down from 2.1 percent price growth in June, according to a Bloomberg survey of economists before tomorrow’s data.

Germany’s 10-year yield climbed six basis points to 1.01 percent after dropping 10 basis points last week. The rate on similar-maturity U.K. gilts rose 10 basis points to 2.43 percent.

Irish bond yields rose, reversing an earlier drop to a record low after Fitch Ratings increased the nation’s debt ranking to A- from BBB+ on Aug. 15. The rate on the country’s 10-year bonds dropped as much as four basis points to 1.949 percent, the lowest since Bloomberg started collecting the data in 1991, before rising one basis point to 2 percent.

The pound strengthened to $1.6726 after Bank of England Governor Mark Carney said he won’t wait for wage increases to raise interest rates. Carney said in an interview with the Sunday Times that the currency’s climb from its 2013 low also won’t prevent an interest-rate increase.

Wheat fell 1.5 percent to $5.55 a bushel in Chicago, after gaining more than 3 percent the previous two sessions.

© Copyright 2014 Bloomberg News. All rights reserved.

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