U.S. Stocks Gain With Dollar as Gold Rally Stalls, Oil Advances

BY: Bloomberg Business - Jeremy Herron - November 16, 2015

The impact from the Paris attacks on global financial markets faded, with investors refocusing attention on the prospects for growth worldwide as the Federal Reserve considers raising interest rates.

The Standard & Poor’s 500 Index halted a three-day slide that capped its worst week since August, while European equities shrugged off declines to close higher as France expanded an aerial bombardment in Syria. An advance in gold stalled near $1,083 an ounce, while the euro weakened toward a six-month low versus the dollar. Treasuries rose with French and German bonds.

“We may not be seeing as much of a negative reaction as we could have if the tragedy occurred two weeks ago when the market was up within one percent of the highs,” said Frank Cappelleri, a market technician at Instinet LLC in New York. “Not to say that we wont get downside going forward but today at least, knowing where the market has come from, it’s helped it at least to be stable.”

The history of terror incidents around the world over the last 15 years shows market reactions are often sharp and, increasingly, short-lived. European shares initially retreated before erasing the loss in trading about one-fifth below the 30-day average. While gold climbed for the first time in five days, its gains faded as shares reversed.

Global equities fell last week by the most in two months, on speculation an October rally had gone too far, too fast amid renewed signs that economies from China to Europe were slowing. The rebound Monday was led by commodities producers that beaten down last week. Two-year Treasury notes halted an advance from last week as futures traders bet the Federal Reserve remains on track to boost rates as soon as next month.


Stocks

The S&P 500 rose 1 percent at 2 p.m. in New York, poised to halt a three-day slide that capped the gauge’s worst week since August. The S&P 500 had fallen in seven of the previous eight sessions after Fed Chair Janet Yellen said policy makers’ December meeting was a “live possibility” for a rate increase.

Shares of commodities and consumer-staples producers led gains Monday, while financial firms slipped with discretionary-product makers.

“This is going to be a market driven by U.S. economic data,” Stephen Wood, who helps manage $265 billion as chief market strategist for North America at Russell Investments in New York, said by phone. “I think the market is still keeping it’s gaze on a December Fed decision.”

The Stoxx Europe 600 Index rose 0.3 percent and the CAC 40 Index of French erased losses of more than 1 percent. Total SA and BP Plc all climbed more than 1 percent, sending the Stoxx 600 Oil & Gas Index higher for the first time in four days. Travel shares fell the most in Europe, with Accor SA down 4.2 percent and Air France-KLM Group losing 5.8 percent.

While France dispatched warplanes to bomb Islamic State’s Syrian nerve center after assailants killed at least 129 people on Friday, the history of terror incidents over the past 15 years shows market reactions can be sharp and short-lived.

“Terrible as these events are on a human level, from a market perspective the impact tends to be transitory,” said Richard McGuire, head of rates strategy at Rabobank International in London.

Private Money Lenders continue offering a great opportunity to buy or refinance before the rates go up in December.

Currencies

The euro approached a six-month low versus the dollar on concern the terror attacks will slow expansion in Europe’s economy. The euro slipped 0.8 percent to $1.0687, the lowest since April. The yen weakened 0.5 percent to 123.23 to the dollar.

U.S. inflation data are scheduled to be released Tuesday. The Fed will publish minutes from its October meeting on Nov. 18.

Bonds

U.S. Treasury two-year notes ended a four-day gain amid speculation the terror attacks won’t prevent the Fed from raising interest rates next month. The yield rose less than one basis point to 0.83 percent, while the 10-year note yield was little changed at 2.26 percent.

Futures show a 64 percent chance the Federal Open Market Committee will announce a rate increase when it meets in December, even after the attacks in Paris, which followed suicide bombs in Beirut that killed at least 43 people.

U.S. corporate debt fell for a second straight week, losing 0.028 percent , according to Bank of America Merrill Lynch Index. The losses were led by the riskiest debt with the difference in yield between investment-grade bonds and junk debt rising to the highest levels in more than a month.

French and German government bonds were little changed after five days of gains. The French 10-year yield was at 0.87 percent, while the yield on similar-maturity German bunds at 0.54 percent. Yields on Belgian, French and German two-year notes fell to the most negative on record.

Emerging Markets

Emerging-market assets bore the brunt of the shift away from risk assets in the wake of Europe’s worst terror attack in more than a decade. The MSCI Emerging Markets Index decreased 0.9 percent to a six-week low. Benchmarks in Hong Kong, South Korea and the Philippines led losses.

A gauge tracking 20 developing-nation currencies fell toward a record, as the attacks compounded concerns over deteriorating economic growth and looming U.S. interest-rate increases. South Korea’s won weakened 0.9 percent and Turkey’s lira declined 0.7 percent.