Bloomberg News

Stocks Rally From Biggest Slump in Month as Gold Retreats

March 04, 2014

Ukraine

Ukraine

Global stocks rebounded from the biggest drop in a month and the ruble rallied as Russia said there was no immediate need to invade eastern Ukraine. Bonds retreated with gold as oil slipped the most in two months.

The MSCI All-Country World Index jumped 1.3 percent by 4:46 p.m. in New York, with Russia’s Micex Index (INDEXCF) snapping a five-day slide and European stocks rallying. The Standard & Poor’s 500 Index (SPX) added 1.5 percent to a record, the biggest one-day gain this year. Ten-year Treasury yields advanced the most in three months, up 10 basis points. West Texas Intermediate crude fell 1.5 percent and Brent slipped 1.8 percent. The yen weakened versus all 16 major peers and gold futures dropped 0.9 percent.

Russian President Vladimir Putin said today that he’s not considering taking control of the Black Sea region of Crimea and would send troops into Ukraine only in extreme circumstances. Secretary of State John Kerry arrived in Kiev as the U.S. and its European allies sought ways to increase economic and diplomatic pressure on Russia to deter a military escalation. The U.S. Treasury said it’s planning an economic assistance package for Ukraine that includes a $1 billion loan guarantee.

“On a very short-term basis, everything you’ve seen in the market has everything to do with the Ukraine,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $160 billion, said by phone. “But over the last two weeks, the market has moved higher with the exception of yesterday. The bet has been made that the economy continues to expand and most of the disruption we’ve seen has been from the weather.”

Jobs Report

The S&P 500’s decline yesterday erased its advance for the year after the gauge rallied 4.3 percent in February to a record 1,859.45. Investors have been speculating that recent weakness in U.S. economic data from housing to employment was caused by inclement weather and that the Federal Reserve will continue to support the world’s biggest economy.

The Labor Department will release its February jobs report March 7. Economists estimate employers increased the pace of hiring to 150,000 workers after adding 113,000 in January, according to a Bloomberg survey.

U.S. equities are set to enter the sixth year of a bull market that started March 9, 2009. The Russell 2000 Index surged 2.8 percent to an all-time high today, its largest jump in more than a year after falling 0.6 percent yesterday.

‘Nervous Investors’

“The drop yesterday and the bounce today are indicative of a lot of nervous investors who are trying to rationalize their long positions,” Tom Stringfellow, president and chief investment officer of San Antonio-based Frost Investment Advisors LLC, which manages about $10 billion, said by phone. “Our investment process thesis long-term has not changed. I am still an optimist that GDP growth will be higher than what downward revisions are. There are underpinnings in the economy that are churning along,” he said, referring to gross domestic product.

Qualcomm Inc. (QCOM:US) gained 3.4 percent in New York after raising its dividend and boosting its share buyback plan. Abercrombie & Fitch Co. advanced 6.1 percent after Credit Suisse Group AG lifted its rating on the teen-apparel retailer’s shares. RadioShack Corp. plunged 17 percent after posting sales below analysts’ estimates.

The Stoxx Europe 600 Index climbed 2.1 percent for its steepest rally in eight months after sliding 2.3 percent yesterday. All but 21 shares in the gauge advanced. The VStoxx Index, which tracks European equity volatility, fell 15 percent after jumping 30 percent yesterday, the most since Europe’s bull market began three years ago.

Ruble Basket

Ashtead Group Plc rallied 13 percent in London after the building-equipment rental company said full-year earnings will exceed its previous projections. Glencore Xstrata Plc climbed 1.7 percent after the commodity trader and metals producer reported a 20 percent jump in 2013 profit.

The ruble climbed 1.2 percent against Bank Rossii’s target basket of dollars and euros, after tumbling 1.5 percent yesterday. The Micex rebounded after an 11 percent drop yesterday, the biggest decline in more than five years. Turkey’s lira gained 1.1 percent against the dollar.

Goldman Sachs Group Inc. said Russia will contain losses in the ruble after policy makers sold billions of dollars on the market yesterday to prop up the currency. Bank Rossii has said it will start setting ruble intervention parameters daily, a move that will give the central bank more room to ease swings.

Ukraine Aid

Yields on Ukraine’s April 2023 dollar-denominated bonds fell 91 basis points, or 0.91 percentage point, to 9.65 percent and the Ukrainian Equities Index climbed 9.5 percent after a 12 percent plunge yesterday.

The U.S. and Europe, which have decried Russian military activity in the majority-Russian speaking Crimea, are racing to seal aid to help the new government in Kiev avoid bankruptcy. Russia is also staking its own claim, saying Ukraine owes state-controlled energy giant OAO Gazprom $2 billion. Ukraine needs $15 billion in the next 2 1/2 years to stay afloat, Finance Minister Oleksandr Shlapak said March 1.

Treasuries retreated with other bonds from developed nations. The yield on 10-year notes climbed the most since Nov. 8, rising to 2.70 percent, according to Bloomberg Bond Trader prices. German 10-year yields increased five basis points to 1.60 percent and U.K. gilts rose five basis points to 2.70 percent.

Havens Fade

“The market perceives an easing of tensions over there and the flight-to-quality bid has faded in response,” said David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors.

The yen weakened 0.8 percent to 102.25 per dollar for the biggest decline since Jan. 14 on a closing basis. Japan’s currency also fell 0.8 percent to 140.49 per euro. Europe’s shared currency was little changed versus the greenback at $1.3741.

The S&P GSCI Spot gauge of raw-materials prices retreated 0.6 percent after jumping 1.6 percent yesterday, the most since August. Gold futures declined to $1,337.90 an ounce.

WTI oil slid from a five-month high to $103.33 a barrel on speculation the tensions between Ukraine and Russia won’t escalate enough to disrupt oil supplies. The southern branch of the Druzhba pipeline, which carries Russian oil via Ukraine to Europe, is operating normally. U.K. gas futures tumbled 5.8 percent, the biggest drop in 11 months, after surging almost 10 percent yesterday.

U.S. natural gas rallied 3.9 percent on forecasts for below-normal March temperatures in the U.S. that would stoke demand for the heating fuel.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Callie Bost in New York at cbost2@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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  • QCOM
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    • $75.95 USD
    • -0.49
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