Flight to haven steadies, bank rescue spurs equities

Bloomberg

A measure of calm returned to markets on Wednesday, as investors started to reassess the risks surrounding a series of key events this week. Bank stocks powered equity gains after a troubled Spanish lender was rescued.
Traditional haven assets steadied after Tuesday’s jump, with gold and Treasuries edging lower and the yen tempering an advance. European equities headed for the first advance in three days as banks surged. Banco Santander SA agreed to buy Banco Popular Espanol SA for a nominal 1 euro ($1.13) after European regulators determined that the troubled lender was likely to fail. Oil slipped as US data showed a large expansion in gasoline stockpiles, offsetting the bullish influence of another decline in crude inventories.
While the risk-off mood has abated, traders still seem reluctant to add any big positions ahead of Thursday, when the ECB will make its June policy decision, the UK will go to the polls and former FBI Director James Comey appears before the US Senate. The purchase of Popular at least offered a distraction, and signaled that Europe has made progress in ensuring the strength and stability of its financial sector.
Hedge fund and asset managers gathered at the Sohn Conference in Hong Kong to present their investment ideas. The European Central Bank releases its policy decision on Thursday. Mario Draghi speaks later that day. Don’t expect policy changes, but the bank may drop the reference to “downside” risks to growth, while reiterating a weak inflation outlook, Bloomberg Intelligence said.
Surveys of UK voters over the past few weeks have indicated a tightening race for Thursday’s election, increasing the chance that Prime Minister Theresa May might not bolster her majority. Comey’s testimony may give clues on how politically effective the Trump administration will be in refocusing attention on its policy agenda.
While the MSCI Asia Pacific Index was little changed, the Shanghai Composite jumped 1.2 percent to the highest in a month. The Aussie dollar climbed to the highest since May 2 after quarterly economic growth met expectations, soothing concerns of a deeper slowdown.
The yen rose 0.2 percent to 109.15 per dollar as of 9:55 a.m. in London, after climbing 0.9 percent on Tuesday. The Bloomberg Dollar Spot Index was flat after sliding 0.4 percent in the previous session to the lowest level since October. The euro and pound both weakened 0.1 percent.
The Stoxx Europe 600 Index rose 0.2 percent. Banks added 1.1 percent. Futures on the S&P 500 were little changed after the underlying gauge lost 0.3 percent on Tuesday. Gold fell 0.1 percent to $1,293.35 an ounce after surging 1.1 percent in the previous session. WTI crude oil lost 0.8 percent to $47.83 a barrel, following its 1.7 percent surge on Tuesday.
The yield on 10-year Treasuries rose less than one basis points to 2.15 percent, after dropping four basis points on Tuesday. French, German and UK benchmark yields rose about one basis point each after losing at least four basis points in the previous session.