Bloomberg News

Stock Futures Rise Before Fed Decision; Spain Bonds Climb

August 01, 2012

Asian Stocks, Oil Decline Ahead of Fed Decision; Aussie Retreats

Students look at an electronic stock board at the Tokyo Stock Exchange in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

U.S. stock-index futures rose, signaling the Standard & Poor’s 500 Index will snap a two-day decline, and the dollar weakened before the Federal Reserve concludes its policy meeting. European shares gained as bonds rallied in Spain and Italy.

S&P 500 futures added 0.2 percent at 7:30 a.m. in New York, after climbing as much as 0.4 percent. The Stoxx Europe 600 Index advanced 0.2 percent. The dollar depreciated against 11 of its 16 major peers. The Spanish two-year note yield dropped 31 basis points, falling for the fifth time in six days, with the similar-maturity Italian rate sliding 23 basis points. Copper lost 0.6 percent.

Fed Chairman Ben S. Bernanke will probably forgo announcing a third round of large-scale asset purchases this week and is more likely to wait until September to unveil plans to buy debt, economists said before today’s policy statement. Reports showing weakness in manufacturing from China to Europe boosted speculation policy makers will take steps to support the global recovery. Leaders of China’s ruling Communist Party pledged yesterday their commitment to ensure stable growth and European Central Bank President Mario Draghi vowed last week to do whatever it takes to preserve the euro.

“Markets are clearly being driven by the expectation of further central bank intervention,” said Peter Garnry, an equity strategist at Saxo Bank A/S in Copenhagen. “Everyone is expecting Draghi to launch another round of secondary-market purchases to get yields on Spanish and Italian bonds lower.”

Paring Gains

U.S. futures pared their advance and stocks erased earlier gains after Bundesbank President Jens Weidmann said the ECB shouldn’t exceed its mandate, according to an article published on the bank’s website. Markets rebounded after the Bundesbank said the interview was conducted on June 29.

The number of shares changing hands in Stoxx 600 (SXXP) companies was 32 percent lower than the 30-day average, according to data compiled by Bloomberg.

Next Plc jumped 6 percent as the U.K. retailer increased its annual profit forecast after reporting first-half sales that rose more than analysts estimated. Arkema SA climbed 8.1 percent as second-quarter earnings beat estimates. Mediaset SpA, the broadcaster controlled by former Italian Prime Minister Silvio Berlusconi, dropped 11 percent after profit declined 65 percent amid lower advertising sales.

Bearish options on European stocks have fallen to the cheapest levels compared with bullish ones in 19 months as traders bet that Draghi will deliver on his promise to save the euro. The ECB will hold its next policy meeting tomorrow.

The cost of insuring European corporate debt declined, with the Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated European companies slipping two basis points to 631.

U.S. Manufacturing

A report today may show U.S. manufacturing stagnated in July. The Institute for Supply Management’s factory index rose to 50.2 last month from 49.7 in June, according to the median estimate of 83 economists surveyed by Bloomberg News. Fifty marks the dividing line between expansion and contraction. Construction spending probably climbed in June for a third month, other data may show.

The yield on the 10-year U.S. Treasury rose one basis point to 1.48 percent, snapping a two-day decline. The Fed has carried out two rounds of so-called quantitative easing since Lehman Brothers Holdings Inc. collapsed in 2008, buying $2.3 trillion in bonds to boost the economy.

German Auction

The yield on the German 10-year bund increased four basis points to 1.33 percent as the government sold 3.35 billion euros ($4.1 billion) of five-year notes at a yield of 0.31 percent. The Spanish 10-year bond yield fell eight basis points to 6.67 percent, leaving the difference in yield with bunds 12 basis points lower at 535 basis points, or 5.35 percentage points. Italy’s 10-year rate dropped 13 basis points.

The MSCI Emerging Markets Index (MXEF) rose 0.1 percent, poised for its highest close since July 5. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong advanced for a fourth day, adding 0.9 percent, in its longest winning streak in six months. Russia’s Micex Index increased 0.4 percent and the FTSE/JSE Africa All Share Index (JALSH) jumped 0.8 percent in Johannesburg.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net;

To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net


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