Global stocks rally on crude as emerging markets jump

BLOOMBERG

Global stocks climbed to a four-month high and emerging markets rallied as oil rose above $40 a barrel and corporate results beat analyst estimates.
European equities were poised for their highest close since January as financial reports boosted companies including Danone and L’Oreal SA. South Korea’s won gained as the central bank refrained from loosening monetary policy and South Africa’s rand jumped, while the dollar and yen weakened. A labor strike in Kuwait boosted the price of crude, which had dropped in early trading on Monday after major producers failed to reach agreement on a proposed output freeze. Silver surged to its strongest level since June, credit markets strengthened and government bonds in Europe and the U.S.
declined.
Shares have rebounded with oil over the past two months as data pointed to a stabilization of Chinese growth, U.S. companies reported better-than-expected earnings and the Federal Reserve signaled a slower pace of interest-rate hikes. That’s easing volatility across financial markets, boosting demand for higher-yielding assets and opening the door for emerging-market debt sales from Abu Dhabi to Argentina. Adding to the optimism, German investor confidence climbed for a second month to its strongest level this year. A gauge of emerging-market currencies jumped to the most since July.
“The oil price recovery overnight has stabilized the market at least at a minimum,” said Christian Stocker, a strategist at UniCredit Bank AG in Munich. “Danone and Roche confirm that earnings are not as bad expected. Next week, earnings from more cyclical companies could change up the picture, but for now it’s looking pretty good.”
About three-quarters of the 43 members of the Standard & Poor’s 500 Index that have reported so far exceeded analysts’ estimates, according to data compiled by Bloomberg. Goldman Sachs Group Inc. was little changed in early trade in New York after reporting earnings.
The MSCI All Country World Index advanced 0.7 percent at 7:50 a.m. New York time, set for the highest close since Dec. 2. West Texas Intermediate crude added 1.2 percent to $40.25 a barrel and South Korea’s won appreciated 1.2 percent.

Stocks
The Stoxx Europe 600 Index jumped 1.4 percent as a measure of energy shares snapped a two-day decline, tracking oil higher. Fresnillo Plc and Anglo American Plc led commodity producers higher with gains of at least 3.3 percent. L’Oreal rallied 4.8 percent after its quarterly sales beat analysts’ estimates.
Danone rose 3.9 percent after posting better-than-estimated first-quarter revenue growth as higher prices for its yogurt products offset lower volume. Roche Holdings AG added 1.7 percent after reporting higher quarterly sales. Publicis Groupe SA jumped 4.6 percent after the advertiser’s three-month revenue beat estimates on more business from digital operations and growth in North America and Europe.
The VStoxx Index slid 4.2 percent. The measure of volatility expectations for euro-area stocks has fallen almost 50 percent from its February peak and is heading for its lowest closing level this year.
Standard & Poor’s 500 Index futures rose 0.5 percent, indicating U.S. equities will extend gains after reaching their highest level since Dec. 1. Goldman Sachs’s earnings follow results from JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley that helped fuel a rally in financials. Data on housing starts in March will also be in focus for clues on the health of the world’s biggest economy and the trajectory of interest rates, with economists estimating a drop from the previous month.

Currencies
The MSCI Emerging Markets Currency Index rose 0.7 percent, poised for the highest since July 31 based on closing prices.
South Korea’s won rose to a five-month high as the Bank of Korea held its benchmark rate at a record low for a 10th consecutive month, saying consumption and economic sentiment appear to be improving. South Africa’s rand appreciated 1.2 percent and touched the strongest level since Dec. 4.
New Zealand’s dollar climbed as much as 1.2 percent to 70.36 U.S. cents and Australia’s currency rallied as much as 0.7 percent to 78.03 U.S. cents. Australia’s central bank said Tuesday “very accommodative” policy is appropriate given low inflation and reiterated concern that the local dollar’s strength could complicate the economy’s rebalancing away from mining.
The comments were contained in the minutes of its April 5 policy meeting.
The euro rose 0.3 percent to $1.1342, after climbing 0.3 percent on Monday amid speculation the European Central Bank will refrain from further monetary easing at an April 21 policy meeting. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, advanced to 11.2 in April, the highest since December.
The yen weakened 0.6 percent to 109.47 per dollar, extending its retreat from a 17-month high of 107.63 reached last week.

Commodities
Crude oil climbed 1.7 percent to $43.62 a barrel in London, after sliding almost 7 percent intraday on Monday after the world’s biggest producers failed to reach an agreement to limit supplies. A labor strike that started Sunday in Kuwait, OPEC’s fourth-biggest member, reduced the nation’s output by 60 percent to 1.1 million barrels a day.
Silver soared 3 percent to $16.7065 per ounce, the highest since June 2. The metal has gained 21 percent this year, the best performing asset in the Bloomberg Commodity Index. Money managers are the most bullish on silver since at least 2006, Commodity Futures Trading Commission data show. Gold rose 0.8 percent. Iron ore extended its rally above $60 a metric ton as steel prices in China surged.

Bonds
The cost of insuring corporate debt against default was at the lowest in about a month. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies fell for the seventh time in eight days, declining one basis points to 70 basis points. A gauge of swaps on junk-rated companies dropped six basis points to 303 basis points.
Treasuries declined, pushing the 10-year yield up two basis points to 1.79 percent. Yields on similar-maturity debt in Italy increased by five basis points to 1.39 percent after the nation’s finance ministry said that it plans to sell new 20-year debt via banks in the near future.
Abu Dhabi, the capital of the United Arab Emirates, is sounding out investors about plans to issue bonds for the first time in more than seven years. The holder of about 6 percent of the world’s oil reserves will meet with investors in the U.A.E., Europe and the U.S. starting April 19, according to a person with knowledge of the plan.
Argentina plans to sell as much as $15 billion of bonds on Tuesday in its return to global bond markets after more than a decade of isolation, setting the stage for the biggest emerging-market sovereign sale since at least 1999.
1Malaysia Development Bhd.’s $3 billion of bonds maturing in March 2023 rose 4.03 cents to 84.05 cents on the dollar to yield 7.40 percent as the state-owned investment company said it expects to avoid a debt default.
The notes plunged 13 percent on Monday after an Abu Dhabi sovereign wealth fund said 1MDB failed to make a loan payment of more than $1 billion. Lebanon was said to have finalized terms on $1 billion of debt sales.