Stocks fluctuate as crude rebounds to $40; emerging assets drop

Bloomberg

US stocks fluctuated near an all-time high, while a rebound in crude oil lifted energy producers and gold snapped its longest rally in six weeks. The rally in global bonds faltered.
The S&P 500 Index swung between gains and losses as retailers stumbled a second day on lackluster quarterly results. Crude rose past $40 a barrel after U.S. oil inventories data, while gold tumbled from a four-week high. Industrial metals declined and the Turkish lira sank amid rising inflation. Treasuries advanced as a four-day selloff in Japanese government bonds abated.
July’s gains in global equities have faltered at the start of August as crude descended into a bear market and recent economic data has done little to bolster confidence in a worldwide expansion. Central banks and governments have signaled unprecedented support, though the latest efforts from Japan and Australia fell flat. The Bank of England is expected to cut interest rates Thursday, while jobs data in the US due Friday should provide clues on the Federal Reserve’s next moves.
“There’s slow movement in a market that’s looking for a reason to go up or go down — it just hasn’t found any,” said Jeff Carbone, managing partner of Cornerstone Financial Partners, which oversees almost $1.1 billion in assets in Charlotte, North Carolina. “We haven’t seen that breakout that would suggest the market is based on fundamentals, it’s still very tied to central banks.”
Services purchasing managers’ indexes from Asia to Europe and the U.S. did little clarify the strength of the global economy. Figures from China showed a slower pace of expansion in July and those for Britain pointed to the most severe decline in seven years after the U.K.’s vote in June to quit the European Union. Growth at U.S. service providers cooled in July after reaching a seven-month high, consistent with more measured progress in the economy, according to the Institute for Supply Management’s non-manufacturing index.

Stocks
The S&P 500 rose 0.1 percent to 2,158.84 at 11:31 a.m. in New York, seeking to halt a two-day losing streak. The Dow Jones Industrial Average edged higher following seven days of declines.
American International Group Inc. rose after saying it will buy back $3 billion of stock following a 6.3 percent increase in second-quarter profit. S&P 500 companies posting results this week include Time Warner Inc. and Priceline Group Inc.
The Stoxx Europe 600 Index climbed 0.1 percent after dropping 1.9 percent in the past two days to a three-week low. While more than 400 companies in the gauge fell, banks proved a bright spot, with an index of lenders — which lost 5.1 percent the previous two days — gaining 1.4 percent for the best performance among the Stoxx 600’s 19 industry groups.
HSBC Bank Plc rose 3.7 percent after saying it will buy back $2.5 billion of its own shares. Societe Generale SA climbed 4.3 percent and Credit Agricole SA added 1.3 percent after reporting higher quarterly earnings. ING Groep NV jumped more than 8 percent as the biggest Dutch lender said second-quarter profit more than tripled.
The MSCI Asia Pacific Index fell 1.8 percent, set for its biggest drop since June 24, as all 10 industry groups declined. Australia’s S&P/ASX 200 Index decreased 1.4 percent amid losses in banks. The Kospi index in Seoul slid 1.2 percent and the Topix lost 2.2 percent, and is down almost 4 percent this week.
The Bloomberg Dollar Spot Index climbed 0.3 percent from a five-week low reached on Tuesday and the U.S. currency advanced versus almost all its 16 major peers. The greenback has been under pressure as wagers that the Federal Reserve will increase interest rates this year faded in recent weeks.
The yen weakened 0.3 percent to 101.17 per dollar, after touching 100.68 on Tuesday, its strongest level since July 11. The Japanese government’s plan incorporates 13.5 trillion yen of fiscal measures — including 7.5 trillion yen in new spending starting this year, and 6 trillion yen in low-cost loans.
“After all the build-up, it’s a disappointment,” Shane Oliver, a global investment strategist at AMP Capital Investors Ltd. in Sydney, which manages more than $110 billion, said by phone.
For more on Japan’s fiscal stimulus boost, click here.
The MSCI Emerging Markets Currency Index slipped 0.2 percent, with the ringgit slumping 0.7 percent, the most in two weeks. South Korea’s won fell for a second day from the highest in more than a year.
The lira lost 0.7 percent and Turkish bonds fell after a report showed inflation accelerated more than analysts predicted in July. The rate jumped as food prices surged and a weaker lira following the failed coup on July 15 boosted the cost of imports. Yields on 10-year bonds climbed 12 basis points to 9.60 percent and the Borsa Istanbul 100 Index declined 1.4 percent.
Bitcoin fell after one of the largest exchanges halted trading because hackers stole about $65 million of the digital currency. Bitcoin lost 3.1 percent against the dollar, bringing its three-day drop to 16 percent.
Bonds
Australian notes due in a decade yielded 1.92 percent, up 11 basis points after they slid to an all-time low on Tuesday. The Reserve Bank of Australia delivered its second quarter-point cut for 2016 that day, taking the cash rate to a record-low 1.5 percent, as expected by a majority of economists and investors.
Yields on similar-maturity Treasuries slipped two basis point to 1.54 percent, following a two-day advance of about 10 basis points. Japan’s 10-year yield declined 3.5 basis points to minus 0.095 percent.
Bill Gross, the former chief investment officer of Pacific Investment Management Co., reiterated his warning on government debt Tuesday after yields touched all-time lows in the past month. The danger of the unprecedented rally, as Gross sees it, is that any reversal will be painful for investors.
Commodities
West Texas Intermediate crude added 1.7 percent to $40.18 a barrel, after falling 5 percent over the past two sessions.
“The decline is not totally unexpected, but the speed and severity of the fall has been a surprise,” said Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “Disruptions tightened the market during the second quarter and the sustainability of those was always going to be relatively short lived. There are still relatively high inventories but the market is approaching a balance.”
U.S. oil inventories dropped by 1.34 million barrels and gasoline stockpiles fell, the American Petroleum Institute was said to have reported. Government data out Wednesday is forecast to show crude and motor fuel supplies decreased.
Gold for immediate delivery was little changed at $1,364.01 an ounce, holding near a three-week high. Zinc fell 0.8 percent, while lead, copper and nickel all dropped more than 0.6 percent.
Noble Group Ltd., the embattled commodities trader raising about $500 million in a rights issue, received a query from the Singapore exchange over trading of its shares after the stock lost as much as 15 percent.