Stocks swing at 3-month high amid earnings as oil slips

BLOOMBERG

U.S. and European shares fluctuated near the highest levels in at least three months as investors focused on companies with results that beat estimates, offsetting declines among energy producers that slumped with the price of crude. The dollar strengthened.
The Standard & Poor’s 500 Index swung near 2,100, a level it breached Tuesday for the first time in four months, while equities in Europe were little changed. Global equities slumped earlier amid a drop in the Shanghai Composite Index spurred by signs the People’s Bank of China has a reduced appetite for monetary easing. The dollar climbed from a nine-month low. Gains in Japanese government bonds sent yields to record lows.
Stocks struggled to extend gains that have pulled them up more than 15 percent from this year’s low amid signs of stabilization in China’s economy and a rally in crude that took back above $40 a barrel.
Wednesday’s pullback in Shanghai shares rekindled, at least briefly, concern that China’s growth may continue to slow, while crude’s pullback reminded investors of oil’s sway on financial markets. Corporate earnings have so far failed to set any definitive tone, as bank results surprised while technology companies have disappointed.
“There’s been no bearish catalyst that’s surfaced to really knock things down and earnings are spilling in and going as expected,” said Nick Kalivas, senior equity product strategist at Invesco PowerShares in Downers Grove, Illinois, which has about $100 billion in its funds. “We’re now a couple of heartbeats off the all-time high and that’s creating performance anxiety among fund managers, causing people to think the picture’s not as glum. It’s keeping an underlying bid in the market.’

Stocks
The S&P 500 was little changed at 2,102.11 at 9:31 a.m. in New York, while the MSCI All-Country Index of shares held near its highest level since Dec. 1. The Stoxx Europe 600 Index erased a drop of as much as 0.5 percent.
Intel Corp. dropped after its first-quarter revenue and forecast for the next three months missed analysts’ estimates. Lexmark International Inc. jumped after the maker of computer printers agreed to a $3.6 billion takeover by Apex Technology Co. and PAG Asia Capital. Coca-Cola Co. dropped 3.1 percent after releasing earnings.
Despite recent gains, the European gauge has still tumbled 16 percent since reaching a record a year ago, and optimism over European Central Bank stimulus has given way to skepticism about its ability to boost growth. Investors are also awaiting the ECB’s next meeting on Thursday for clues about the path of monetary policy.
Benchmark share gauges fell across Asia’s developing economies and the MSCI Emerging Markets Index retreated from a five-month high. Japan’s Topix index closed up 0.2 percent, after earlier climbing as much as 1.3 percent. Mitsubishi Motors Corp. tumbled 15 percent, its biggest loss in more than a decade, after the company said it would brief media on “improper fuel economy” tests. The Shanghai Composite Index posted its lowest close this month.

Currencies
Turkey’s lira rose 0.8 percent. Policy makers, who met for the first time under their new central bank chief, Murat Cetinkaya, cut the upper band of a three-pronged rate corridor by 50 basis points to 10 percent.
The won rose as much as 0.7 percent to a five-month high, before closing 0.1 percent higher in Seoul, while South Africa’s rand jumped 0.5 percent and reached its strongest level since November.
The MSCI Emerging Markets Currency Index rose 0.2 percent to the highest since July. India’s rupee climbed 0.6 percent, the most in a month, after the nation’s trade deficit narrowed to a five-year low. Malaysia’s ringgit rose 0.6 percent.
The New Zealand dollar retreated from its strongest level since June. The kiwi weakened 0.5 percent to 70.11 U.S. cents after breaching the 70-cent mark on Tuesday for the first time since June.

Commodities
Iron ore futures traded on the Dalian Commodity Exchange climbed as much as 5.9 percent on BHP Billiton’s production forecast cut. Rio de Janeiro-based Vale SA, the largest iron-ore miner, is expected to report record output for the first quarter on Wednesday.
West Texas Intermediate crude oil was lower after rising 3.3 percent on Tuesday amid a three-day labor strike that reduced Kuwait’s output by as much as 1.7 million barrels a day. The country is OPEC’s fourth-largest producer.
“The size of the disruption, had the strike persisted, would have been quite significant,” Ric Spooner, a chief market analyst at CMC Markets in Sydney, said by phone. “It took quite a lot of oil out of production.”
Silver gained 0.9 percent. The metal surged 22 percent this year and entered a bull market on Tuesday after money managers last week increased their net-long positions by 30 percent to a record.
Bonds
Treasuries were little changed with the yield on 10-year securities at 1.78 percent. It may drop to a never-before-seen 1.25 percent in 2016 as investors seek alternatives to lower-yielding securities elsewhere in the world, according to Robert Tipp, the head of global bonds and foreign exchange for the fixed-income division of Prudential Financial Inc. While the yield on 10-year Treasuries was less than half a percentage point from its record low reached in 2012, the securities offered a yield pick-up of 160 basis points over similar-maturity German bonds and about 188 basis points over Japanese government debt.
Japan’s 40-year bond yield fell to a record low, meaning all the nation’s sovereign bonds yield less than 0.3 percent, as investors rush for securities with positive income.
The cost of insuring corporate debt against default rose for the first time this week. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies climbed two basis points to 72 basis points.
Malaysia is moving closer to selling global Islamic bonds. It may price the 10- and 30-year dollar notes at 150 and 165 basis points over U.S. Treasuries, according to a person familiar with the matter who isn’t authorized to speak publicly. Based on current market yields, that would suggest a coupon rate of 3.27 percent for the shorter-maturity notes and 4.23 percent for the longer-term debt.