Europe Stocks Rise with U.S., Europe Futures as Oil Drops

Big 5

European and Asian stocks rose with U.S. equity-index futures and bonds as investors await a Federal Reserve decision on its stimulus program. Oil fell for a third day on speculation U.S. supplies are near a four-month high.

The benchmark Stoxx Europe 600 Index gained 0.6 percent at 8:03 a.m. in London, while the MSCI Asia Pacific Index was up 0.3 percent. Standard & Poor’s 500 Index futures added 0.3 percent. West Texas Intermediate oil slid 0.2 percent, taking its decline since a June high to almost 25 percent. Australian and Japanese government bonds rose.

The Fed will probably finish its monthly bond-buying and leave its key interest rate unchanged near zero, according to surveys of economists conducted by Bloomberg. Results announced this morning presented a mixed picture, as UBS AG missed net-income estimates and Standard Chartered Plc posted a decline in pretax profit, while Sanofi’s third-quarter earnings beat projections by 1 euro cent. Europe’s benchmark fell yesterday as investors looked beyond the European Central Bank’s assessment of lenders’ financial health.

“Overall, sustained lower oil prices should help the global economic recovery regain traction in 2015, especially if central bankers remain accommodative,” Gordon Kwan, Nomura Holdings Inc.’s Hong Kong-based head of regional oil and gas research, said in an e-mail.

A gauge of Chinese shares in Hong Kong advanced 2.3 percent, the most in almost two months, Hong Kong’s Hang Seng Index added 1.6 percent, snapping a three-day losing streak, while the Shanghai Composite Index (SHCOMP) rose 2.1 percent. China’s President Xi Jinping said other regions should copy the model of the Shanghai free-trade zone.

More Zones

Experience gained at Shanghai’s free trade zone can be used for more places as soon as possible, Xinhua News Agency reported, citing Xi. Industrial companies are surging after government officials involved in the transaction said China’s State Council ordered the merger of trainmakers China Northern Locomotive & Rolling Stock Industry Group Corp. and CSR Group.

WTI futures dropped as much as 0.8 percent to $80.36 in New York. Crude stockpiles are forecast to have expanded by 3.8 million barrels to 381.5 million last week, a Bloomberg News survey shows before government data tomorrow.

OPEC, Brent

OPEC is unlikely to reduce its production target when it meets next month, said Mohsen Qamsari, a director for international affairs at National Iranian Oil Co., according to the Oil Ministry’s news service. Qantas Airways Ltd. (QAN) jumped 7.3 percent in Sydney on cheaper fuel prices.

Six of the 10 industry groups on the Asia-Pacific gauge advanced today, driving the measure toward its highest close in two weeks. Copper prices gained 0.3 percent, while zinc climbed 0.2 percent. Australia’s S&P/ASX 200 Index declined 0.1 percent. South Korea’s Kospi index slipped 0.3 percent.

Japan’s Topix index slid 0.2 percent. Lower oil prices mean the Bank of Japan may tone down or abandon its inflation outlook in a report this week, people familiar with the discussions said. Data showed retail sales beat estimates in the world’s third-largest economy. BOJ Governor Haruhiko Kuroda and the board will keep monetary policy unchanged at a meeting on Oct. 31, according to 29 of 32 economists surveyed by Bloomberg News. The BOJ is set to announce its semi-annual outlook on the economy and prices the same day.

Bonds Rise

Yields on Australian government bonds due in a decade dropped six basis points, or 0.06 percentage point, to 3.23 percent on speculation U.S. interest rates will remain low for an extended period lifted Treasuries in New York. Rates on 10-year Treasury notes retreated one basis point 2.25 percent and similar maturity Japanese securities paid 0.45 percent, one basis point less than yesterday.

Data yesterday indicated uneven economic growth in the U.S. Contracts to purchase previously owned homes rose less than forecast in September, showing housing will take time to gain momentum. Another release showed growth in services activity slowed this month, while the Dallas Fed’s gauge of regional manufacturing fell.

The S&P 500 slipped 0.2 percent yesterday. U.S. energy producers declined after oil dipped below $80 a barrel, while telephone and consumer shares rose.

“We are not sure that there will be a smooth handover from Fed QE to sustainable economic growth without financial market instability,” said Stewart Richardson, who helps oversee $100 million at RMG Wealth Management LLP in London. “We fear that recession risks, even in the U.S., are higher than most would care to admit because of weak overseas economies and potentially vulnerable financial markets with no QE to support them.”

Source: Bloomberg