Thursday, 09 July, 2015
Europe Stocks Rise as China Rebound Sends Yen, Treasuries Lower
(Bloomberg) — European stocks climbed with U.S. futures as Chinese equity indexes rebounded amid government efforts to halt a $3.9 trillion rout. The yen weakened with Treasuries and German bunds, while commodities advanced.
The Stoxx Europe 600 Index added 0.8 percent by 8:16 a.m. in London, after the Shanghai Composite Index capped its biggest one-day gain since 2009 and Hong Kong’s Hang Seng China Enterprises Index snapped a five-day, 12 percent rout. Standard & Poor’s 500 Index futures added 0.7 percent. The yen slipped 0.5 percent while the yield on 10-year Treasuries and bunds rose at least two basis points. U.S. oil climbed 1.6 percent and the Bloomberg Commodity Index advanced.
China is bolstering efforts to arrest a selloff that has rippled through risk assets globally, banning major stockholders from selling stakes as more than half the country’s listed companies are suspended from trading. Greek Prime Minister Alexis Tsipras has until midnight Thursday to present his European colleagues with a plan that includes spending cuts to secure a bailout.
“Volatility will continue, but I suspect the panicky stage of the selloff in China’s share market has run its course,” said Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors Ltd. in Sydney. “So much panic and so much selling climax and washout and the market has only just come down to its 200-day moving average. These are desperate measures and it reflects the immaturity of the market.”
China Swings
All 19 industry groups on the Stoxx 600 advanced after the gauge closed little changed on Wednesday. Resources firms led gains as Bloomberg’s commodity gauge rebounded a second day.
The magnitude of price swings on the Shanghai Composite gauge is at the highest since at least 2008, according to data compiled by Bloomberg. The benchmark gauge for China’s largest equity venue surged 5.8 percent Thursday after falling to as low as 3,421.52 Wednesday, trading below its 200-day average for the first time since July 24 last year.
Some 1,439 mainland listed companies are suspended from trading, more than half of the total.
Hong Kong’s gauge of Chinese companies climbed after plunging 6.1 percent Wednesday, the worst single-day loss since 2011. China Railway Group Ltd. jumped 10 percent after plummeting 23 percent in the previous five days. BYD Co., the electric-car maker backed by Warren Buffett, advanced 13 percent after a 35 percent, five-day loss.
Brokerage Haitong Securities Co. said it will buy back as much as 21.6 billion yuan ($3.48 billion) of its Shanghai and Hong Kong-listed shares.
Free Markets
The new moves are a sign of “desperation” and will fuel fear among investors, said Mark Mobius, executive chairman of the Templeton Emerging Markets Group. The efforts just “postpone the inevitable,” according to Wells Fargo Funds Management.
“There’s been much too much market intervention by the securities authorities, so it’s really removed the ability of the Chinese mainland market to operate in a free manner,” Michael Shaoul, who oversees $5 billion, as chief executive officer at Marketfield Asset Management in New York, said on Bloomberg TV. “At the same time, there’s been much less intervention than you would want to see by the central bank. You need to see rate cuts not of 25 basis points but of 50 or 75 basis points.”
Oil, Copper
Japan’s yen slipped to 121.31 per dollar after a five day winning streak, the longest since April. It was weaker against all 16 major peers. The euro was little changed at $1.1073.
West Texas Intermediate crude oil rose to $52.48 a barrel in New York, heading for its first increase in six days. Brent added 1.2 percent in London. Norway’s krone advanced 0.3 percent after finishing Wednesday at the lowest since March 17.
Industrial metals rose for a second day after the London Metal Exchange Index jumped 2.6 percent Wednesday to snap its biggest three-day rout in 3 1/2 years. Copper for three-month delivery increased 0.5 percent and nickel surged 2.8 percent.
The Aussie erased a drop of as much as 0.5 percent to climb 0.7 percent after the economy added 7,300 jobs in June, beating economists’ forecasts for no change. The better-than-estimated jobs number helped to counter concern about demand for commodities from China — the biggest trading partner — amid a collapse in iron ore prices.
Iron ore with 62 percent content delivered to Qingdao sank 10 percent to $44.59 a dry metric ton on Wednesday, according to Metal Bulletin Ltd. Andy Xie, an independent economist who predicted a collapse in prices in February, is forecasting a metric ton of the raw material will trade in the $30s this year.
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