Stocks rise with bonds as Europe lifts market with triple boost

Bloomberg.- European markets started the week in a buoyant mood, as equities rose on earnings, bonds jumped on a brightening credit outlook and economic data exceeded analyst estimates.

Shares climbed around the world, with 15 of the 19 industry groups in the Stoxx Europe 600 Index rising as Royal Philips NV surged on improved profits. Government bonds advanced after Portugal was retained at investment grade by DBRS Ltd. and Spain moved closer to resolving a political impasse. Perceived corporate-credit risk fell to the lowest in more than a month. Emerging-market currencies strengthened, lead by the rand, while in Asia, the Shanghai Composite Index reached its highest level since January and the yuan sank toward an all-time low in the offshore market. Base metals jumped on signs of rising demand.

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With more than 100 companies in the Stoxx 600 scheduled to report results this week, Europe’s markets received an additional boost after a Purchasing Managers’ Index for manufacturing and services showed euro-area economic momentum accelerated to the fastest pace this year. Earnings will play a key role for stocks this week, with three of the world’s four biggest companies by market value, including Apple Inc., due to announce results in America, while China has all four of its largest listed banks reporting.

“We have better macroeconomic numbers coming out of Europe so we can expect a good performance from European markets,” said Pierre Mouton, who helps oversee about $8.5 billion as a fund manager at Notz, Stucki & Cie. in Geneva. “The continuation of earnings results in the U.S. and Europe will drive equity markets.”

Stocks

The Stoxx Europe 600 Index climbed 0.4 percent as of 8:25 a.m. New York time. Royal Philips NV jumped by the most since January after the Dutch company announced a 14 percent increase in third-quarter profit.

Spain’s benchmark IBEX 35 Index advanced the most among western-European markets after the Socialist Party leadership opted to stand aside and let acting Prime Minister Mariano Rajoy take office for a second term, signaling the end of the nation’s 10-month political stalemate.

Syngenta AG tumbled 6.4 percent, the most in 14 months, after the European Union said China National Chemical Corp. didn’t submit concessions to EU regulators by an Oct. 21 deadline for a review of the $43 billion takeover of the Swiss seed and pesticide maker.

The MSCI Asia Pacific Index rose 0.3 percent, reversing an earlier loss. The Shanghai Composite Index jumped 1.2 percent on optimism Chinese authorities will boost spending and hasten reform of state-owned companies. Communist Party leaders are gathering in Beijing this week for a full meeting of the party’s Central Committee, or plenum, a key forum for securing broader support for policy moves.

S&P 500 Index futures rallied 0.3 percent before American companies including Visa Inc. announce quarterly earnings on Monday. About 80 percent of the 118 members of the S&P 500 that have reported so far beat estimates, though analysts still forecast a contraction in profits.

AT&T Inc. slipped 2.2 percent in early New York trading after it said over the weekend it agreed to buy Time Warner Inc. for $85.4 billion. The telecom provider’s 1 billion pounds ($1.2 billion) of June 2043 notes fell three pence on the pound to 107 pence, according to data compiled by Bloomberg.

HNA Group will acquire about 25 percent of Hilton Worldwide Holdings Inc. from Blackstone Group LP, the Chinese firm said in a statement. The transaction is valued at about $6.5 billion, or $26.25 per share in cash, and will cut Blackstone’s interest in Hilton to about 21 percent. Hilton rose 6.3 percent in early U.S. trading.

Bonds

Portugal’s 10-year bond yield declined eight basis points to 3.08 percent, touching the lowest level in more than a month. The nation’s credit rating was retained at investment grade by DBRS, securing eligibility of the country’s debt for the European Central Bank’s bond purchase program. France’s bonds rose after S&P Global Ratings revised its outlook to stable from negative, saying that downside risks to the nation’s economy identified two years ago have not materialized. Spain’s 10-year yield fell four basis points to 1.08 percent.

Treasuries due in a decade were little changed and yielded 1.74 percent, after the rate sank six basis points last week. U.S. government debt handed investors a 0.6 percent loss in the month through Sunday, still the best performance in dollar terms among 26 major markets. U.K. notes ranked last with an 8.7 percent loss.

The cost of insuring investment-grade corporate debt against default dropped for the sixth time in seven days. The Markit iTraxx Europe index of credit-default swaps tied to highly rated companies fell one basis point to 70 basis points. An index of swaps on junk-rated companies declined for a fifth day, falling four basis points to 317 basis points. That’s the lowest since Sept 9.

Currencies

The Bloomberg Dollar Spot Index fluctuated ahead of Monday speeches by Federal Reserve Governor Jerome Powell and regional Fed presidents for New York, St. Louis and Chicago. The chance of a rate hike this year increased by two percentage points last week to 68 percent in the futures market. The euro halted a four-day run of losses.

The yuan fell amid signs China may be willing to tolerate a weaker exchange rate to help arrest an export slump. The currency slid as much as 0.2 percent to 6.7842 a dollar in offshore trading, near a record low of 6.7850 reached Sept. 1, 2010. In Shanghai, the currency dropped as much as 0.17 percent to 6.7770, the weakest level in six years and well past the 6.75 year-end median forecast in a Bloomberg survey.

The People’s Bank of China cut its daily reference rate by 0.2 percent to 6.7690. A net $44.7 billion worth of yuan payments left the nation last month, according to data posted on the State Administration of Foreign Exchange’s website Friday. Goldman Sachs Group Inc. estimated on Friday that China’s outflows totaled about $500 billion in the first nine months of this year.

The MSCI Emerging Markets Currency Index advanced 0.1 percent, after retreating 0.4 percent in the previous two sessions. The rand climbed 0.7 percent, halting a two-day retreat.

Commodities

Industrial metals advanced across the board following a seven-day slide in the London Metal Exchange’s LMEX Index. Zinc rallied as much as 2.1 percent after orders to remove the metal from depots tracked by the LME jumped the most since August 2015. Climbing removal bookings usually send a signal to traders demand is improving. Gold rose 0.3 percent, extending last week’s 1.2 percent advance.

Crude oil fell 1.2 percent, trading at $50.25 after Iraq’s oil minister said Sunday that the nation should be exempted from production cuts proposed by the Organization of Petroleum Exporting Countries.

Soybean futures for January rose 1.3 percent to a two-month high on the Chicago Board of Trade after gaining for a third straight week amid export demand for the U.S. crop.

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