By Nick Gentle and Emma O’Brien
ECB Executive Board member Benoit Coeure said in interview with the Irish Times that... Read More
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Sovereign bonds rallied across Europe and Swiss stocks tumbled as the effects from Switzerland abandoning the franc’s cap extended into a second day. The country’s currency weakened after yesterday’s record surge, while European stocks fell with U.S. equity-index futures.
Yields (GACGB10) on 10-year German notes dropped three basis points to 0.45 percent at 10:35 a.m. in London and rates for gilts lost four basis points to 1.47 percent. The 10-year Swiss yield fell below zero for the first time, while the benchmark equity gauge retreated 4.7 percent, following yesterday’s 8.7 percent decline. The franc weakened 4.3 percent to 1.0189 per euro after soaring 23 percent yesterday. The Stoxx Europe 600 Index fell 0.5 percent and Standard & Poor’s 500 Index
futures slid 0.4 percent. Oil rose 3.2 percent to $47.72 a barrel in New York.
The Swiss National Bank’s move sparked mayhem on trading floors and increased speculation that the European Central Bank will unveil a broader stimulus when it meets next week. FXCM Inc., the largest U.S. retail foreign-exchange brokerage, said it may have breached some capital requirements after clients got caught out by the franc surge. Goldman Sachs Group Inc. is among companies scheduled to report earnings today.
“The SNB caught almost everyone by surprise and it’s creating unease and anxiety in markets,” Nader Naeimi, who helps manage about $125 billion as Sydney-based head of dynamic asset allocation at AMP Capital Investors, said by phone. “The strategy is capital preservation for now.”
ECB Outlook
France’s 10-year yield fell to a record-low 0.613 percent and the rate for similar-maturity Italian notes reached a record-low 1.698 percent.
ECB Executive Board member Benoit Coeure said in interview with the Irish Times that there is no decision on quantitative easing yet though “the only thing I can say is that, for it to be efficient, it would have to be big.”
More than four shares declined for every one that advanced in the Stoxx 600, with trading volumes 16 percent higher than the 30-day average, according to data compiled by Bloomberg. Volumes on the SMI were five times greater than average, the data show.
“We’ve had so much to digest so early in the year, it’s very difficult to pinpoint a direction in the markets,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit in Hellerup, Denmark. “It will take a long time to absorb all this before we can step back and really focus on fundamentals. There’s definitely speculation that the SNB did this in advance of expectations for the ECB to announce QE next week.”
Swiss Banks
UBS Group AG slid 5.4 percent, extending yesterday’s 12 percent tumble. Credit Suisse Group AG slid 7 percent, following an 11 percent drop yesterday.
Nestle SA, Novartis AG and Roche Holding AG -- the biggest shares on the Stoxx 600 -- dropped at least 2.8 percent. Stocks of Swiss exporters rebounded today, while watchmakers Cie. Financiere Richemont SA and Swatch Group AG extended yesterday’s losses.
BP Plc gained after a U.S. judge ruled that the company faces a $13.7 billion fine for the 2010 Gulf of Mexico oil spill, about a quarter less than the U.S. had calculated.
Intel Corp. fell in late New York trading after the world’s largest chipmaker reported an operating loss of $4.21 billion.
The MSCI Emerging Markets Index fell 0.4 percent, taking its loss this week to 0.6 percent, ending four weeks of gains. South Korea’s won and the Taiwan dollar rose 0.6 percent against the dollar, while the Polish zloty slipped 0.3 percent versus the euro.
China Rally
The Shanghai Composite Index (SHCOMP) rallied 1.3 percent. The gauge has advanced 2.6 percent this week, a 10th week of gains that’s the longest winning streak since May 2007, after credit growth expanded and speculation grew the central bank will cut reserve-requirement ratios. The Hang Seng China Enterprises Index slipped 0.9 percent, leaving it little changed for the week.
South Korea’s Kospi (KOSPI) sank 1.4 percent as the won’s gain to a two-month high dragged exporters including Hyundai Motor Co. and Samsung Electronics Co. lower.
West Texas Intermediate crude’s gain trimmed this week’s decline to 1.3 percent. The contract slid for an eighth week, the longest run of losses since 1986, as a global supply glut shows little sign of abating. Brent crude climbed 4.9 percent to $49.99 in London, leaving it 0.2 percent lower over five days.
Oil Output
Non-OPEC oil producers will increase output this year at a slower rate than previously forecast, aiding a recovery in crude prices, the International Energy Agency said in a report today. The Paris-based adviser lowered its non-OPEC supply growth estimate in the first cut since the 2015 forecast was introduced in July.
Oil prices have collapsed almost 60 percent from last year’s peak, as the Organization of Petroleum Exporting Countries resolved to defend market share against the fastest U.S. production in more than three decades.
Copper for three-month delivery on the London Metal Exchange rose 1 percent, paring this week’s loss to 6.7 percent, the biggest such retreat since September 2011.
