European shares headed for their biggest monthly rally since May, while oil and metals led commodities higher. The ruble weakened as the conflict between Russia and Ukraine worsened.
The Stoxx Europe 600 Index climbed less than 0.1 per cent at 10:54 a.m. in London today, and futures on the Standard & Poor’s 500 Index rose 0.2 per cent. The euro headed for a seventh weekly decline, the longest stretch in more than a decade. West Texas Intermediate crude oil advanced 0.5 per cent in New York and aluminum reached an 18-month high. Russia’s currency extended its second monthly drop, while the MSCI Emerging Markets Index headed for its longest stretch of monthly gains since 2005.
More than $1-trillion was added to the value of global equities in August, sending it to a record $66.2-trillion this week. Yields on bonds from Italy to Spain and Germany hit record lows this week on speculation the European Central Bank will start a bond-buying program to spur the economy. Stocks fell yesterday after escalating tension over Ukraine overshadowed better-than-expected U.S. gross domestic product. Euro-area inflation slowed in August to the weakest rate since 2009.
“Draghi has made a speech which opens up the gate for speculation in every monetary-policy dimension,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank, speaking from Frankfurt. “The market is interpreting Draghi as if he’s put every option on the table. That’s a very powerful tool and it will keep a lid on yields.”
Consumer Prices Consumer prices in the euro area rose 0.3 per cent in August from a year earlier after a 0.4 per cent increase in July, the European Union’s statistics office said. That matched the median economist forecast in a Bloomberg News survey. Unemployment for the region remained at 11.5 per cent in July, Eurostat said in a separate release.
ECB President Mario Draghi said last week at the Federal Reserve symposium in Jackson Hole, Wyoming, that policy makers will use “all the available instruments needed to ensure price stability” and are “ready to adjust our policy stance further.”
The Stoxx 600 was little changed today after its biggest loss since Aug. 7. The index is up for a third week and has rallied 1.7 per cent this month.
AstraZeneca, Fiat AstraZeneca Plc climbed 2.5 per cent today as UBS AG said the pharmaceutical firm’s treatment for colorectal cancer has moved to the next stage of testing. Fiat SpA rose 2.3 per cent after saying it will spend less than the limit the Italian carmaker set to buy shares from investors who opted to sell ahead of its merger with Chrysler Group LLC, clearing a key hurdle before the deal can close.
Tesco Plc dropped 5.6 per cent after the U.K.’s biggest retailer cut its full-year profit forecast and its interim dividend. Peer J Sainsbury Plc lost 3.8 per cent, and Wm Morrison Supermarkets Plc slid 4.2 per cent.
The volume of Stoxx 600 shares changing hands today was 16 per cent lower than the 30-day average, according to data compiled by Bloomberg.
Futures on the S&P 500 expiring in September advanced today after the index fell 0.2 per cent yesterday, retreating from its record 2,000.12. The gauge has rallied for a fourth week, the longest stretch since November 2013, and is up 3.4 per cent this month, the most since February.
Lower Volume With the U.S. headed into the Labor Day holiday weekend, the stock market has been experiencing the slowest trading in at least six years. Volume has been below 5 billion shares in each of the past eight days, the longest stretch in data compiled by Bloomberg going back to 2008.
The MSCI All-Country World Index was little changed today and is heading for a 1.8 per cent increase for August, the most since May. The MSCI AC Asia Pacific Index slipped 0.2 per cent today, taking its monthly drop to 0.6 per cent, the most since January.
The euro was set for a seven-week slide, the longest stretch since December 1999. The currency was little changed at $1.3184 and is down 0.5 per cent this week.
Yields on bonds of Spain, Italy, France and Germany all reached record lows this week.
German 10-year bonds were set for an eighth monthly advance, the longest run since January 2005. German 10-year yields were little changed at 0.91 per cent after dropping to a record 0.866 per cent yesterday. The yield has fallen 25 basis points this month.
‘Room to Rally’ “The bond market still has more room to rally,” said Ali Jalai, a bond trader in Singapore at Scotiabank, a unit of Bank of Nova Scotia, one of 22 primary dealers that trade directly with the Fed. “The consensus is that the ECB will announce some sort of bond-buying program.”
The cost of insuring against losses on corporate debt fell, with the Markit iTraxx Europe index of credit-default swaps on 125 investment-grade companies dropping 0.5 basis point to 58.5 basis points. The gauge is heading for its third weekly decline and its biggest monthly decrease since February.
West Texas Intermediate crude oil advanced 0.5 per cent in New York to $94.90 a barrel. Brent crude gained 0.4 per cent in London to $103.15 a barrel.
Aluminum climbed as much as 1.2 per cent to $2,106 a metric ton on the London Metal Exchange, the highest price since February 2013. It headed for a seventh consecutive monthly advance, the longest run of gains since at least July 1987, as stockpiles tracked by the bourse reached a two-year low. Copper climbed 0.3 per cent.
Emerging Markets The MSCI Emerging Markets Index slipped less than 0.1 per cent, leaving it 1.9 per cent higher this month. The gauge has climbed for seven consecutive months, the longest winning streak since 2005.
The ruble declined 0.3 per cent to 36.8710 per dollar, extending this month’s drop to 3.2 per cent. The Micex index of stocks slipped 0.7 per cent, trimming its gain in August to 2.5 per cent.
Ukraine’s hryvnia slid 0.4 per cent to 13.55 per dollar, extending this month’s drop to 9.4 per cent, the worst performance among more than 170 currencies worldwide. The government’s 2017 Eurobond fell for an eighth day, the longest losing streak since March 2013, sending the yield 15 basis points higher to 12.37 per cent, a three-month high.
U.S. President Barack Obama said that Russia faces “more costs and consequences” for repeatedly violating the sovereignty and territorial integrity of its former Soviet republic neighbor. While the government in Moscow has denied involvement in the unrest in Ukraine’s east, a group that lobbies for the rights of Russian soldiers said there are signs of a growing number of troops being dispatched to fight there.
There are currently 20,000 Russian troops near the Ukrainian border, with 1,000 operating inside the former Soviet republic, a North Atlantic Treaty Organization military officer estimated yesterday.