Wednesday, 20 May, 2015

Dollar Gains Versus Euro as Treasuries Climb Before Fed Minutes

(Bloomberg) — The dollar traded at a two-week high versus the euro and extended gains against the yen, while Treasuries advanced before the Federal Reserve releases minutes of its last meeting. Oil rallied for the first time in six days. The Bloomberg Dollar Spot Index climbed 0.3 percent by 8:15 a.m. in London, after its biggest two-day advance since 2011. The euro slipped 0.6 percent and the yen dropped 0.3 percent. The yield on 10-year Treasuries fell four basis points. European stocks and bonds were little changed after plunging yesterday as the European Central Bank revealed it is bringing forward some asset purchases. Standard & Poor’s 500 Index futures were little changed. U.S. oil rose ahead of a stockpiles report. The dollar extended a rebound from a four-month low as the highest new-housing starts since 2007 reignited speculation about when the Fed will raise rates, underscoring the divergence of U.S. monetary policy from Europe and the Asia Pacific. European Central Bank policy makers will discuss Greek bank aid on Wednesday. The Bank of Japan meets Thursday to review its stimulus policies. “The dollar is getting a boost from widening yield differences between the U.S. and Germany,” said Daisuke Uno, the Tokyo-based chief strategist at Sumitomo Mitsui Banking Corp. “U.S. data was strong while ECB officials’ comments pushed German yields lower and this has sparked euro selling and dollar buying.” Greece Talks The Stoxx Europe 600 Index was little changed after rallying 1.7 percent on Tuesday as Executive Board member Benoit Coeure said the ECB will increase bond buying in May and June. The gauge rebounded 4.1 percent from its two-month low earlier in May through yesterday. Investors are watching developments in Greece as the ASE Index closed at its highest level since March 6. ECB policy makers are discussing aid for the nation’s banks on Wednesday. Gross domestic product in Japan, Asia’s second-largest economy, expanded at an annualized rate of 2.4 percent in the first quarter, according to economists surveyed by Bloomberg, beating the 1.6 percent growth predicted by economists and indicating an increase from 1.5 percent in the last three months of 2014. The Topix index climbed 0.6 percent for a fourth straight advance, while the Nikkei 225 Stock Average extended its streak above 20,000 points, rising 0.9 percent. The Kospi index in Seoul increased 0.9 percent, while Australia’s S&P/ASX 200 Index swung between gains and losses. Market Cap The Shanghai Composite Index erased this month’s losses after surging 3.1 percent Tuesday. Hong Kong’s Hang Seng Index slipped as Tencent Holdings Ltd. retreated after its shares were removed from Goldman Sachs Group Inc.’s Asia Pacific conviction list. A gauge of Chinese shares in the city erased gains to trade little changed. The combined value of Hong Kong and mainland shares rose to $13.5 trillion Tuesday, surpassing the $13.3 trillion aggregate value of the 10 largest European markets, according to data compiled by Bloomberg. Hanergy Thin Film Power Group Ltd., a solar-equipment maker whose shares surged more than 550 percent in the year to Tuesday, suspended trading in Hong Kong after the stock fell 47 percent in early trade. The company’s chairman failed to appear at annual general meeting Wednesday morning. New home construction in the U.S. jumped in April to the most since November 2007, indicating the industry regained its footing after weaker readings in February and March. Ten-year Treasuries paid 2.25 percent. The rate on U.S. benchmark notes jumped 15 basis points the previous two days. Dollar Rally The Bloomberg dollar index, which tracks the greenback versus 10 major peers, climbed a third day. The measure jumped 0.9 percent Tuesday to cap its steepest two-day increase since December 2011. The yen dropped as much as 0.3 percent to 121.1 per dollar and the euro slipped to $1.1084 following two days of losses in excess of 1.1 percent. Emerging-market currencies caught up with their developing-nation peers, with South Korea’s won weakening 0.7 percent in a second day of declines. The Malaysian ringgit slipped 0.7 percent, while the Thai baht lost 0.6 percent. The Bloomberg Commodity Index was little changed Wednesday after plunging the most since Feb. 4 yesterday. West Texas Intermediate crude for July delivery rose to $58.70 a barrel, after sinking 3.7 percent Tuesday to $57.26, the lowest settlement since April 28. Crude is poised to return to recent lows as an ongoing surplus in the market suppresses prices, Goldman Sachs Group Inc. analysts said. Oil Bear? “Both the oil and metals markets are hit hard by the strong dollar, said Hong Sung Ki, a commodities analyst at Samsung Futures Inc. ”We may be entering a bear market for oil again as the dollar is gaining. The market had been hopeful that the Chinese economy may be improving but these expectations are turning into disappointment as we continue to see weak economic data.” U.S. oil inventories probably shrank by 2 million barrels through May 15, according to a Bloomberg survey before Wednesday’s Energy Information Administration report. Supplies are still near the highest level in 85 years, based on monthly records dating back to 1920, and are more than 100 million barrels above the five-year average for this time of the year. Nickel for three-month delivery on the London Metal Exchange slid to $12,880 a dry metric ton, after slumping 4.8 percent Tuesday, the most in eight months. Archr LLP is Authorised and regulated by the Financial Conduct Authority (FCA reference 617163). Archr LLP is not covered by the Financial Services Compensation Scheme (FSCS). Archr is registered in England and Wales No. OC371018. 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