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Dollar Weakens as Bonds Rise, Oil Trims Advance

Markets

The dollar weakened before a report forecast to show U.S. inflation remained subdued. European bonds rose, oil trimmed the longest run of weekly gains on record and Chinese shares jumped to seven-year high.

The Bloomberg Dollar Spot Index fell 0.2 percent at 9:40 a.m. in London, paring its first weekly advance since the period ended April 10. The yield on Germany’s 10-year bund dropped four basis points to 0.60 percent and France’s also slid four basis points, to 0.88 percent. The Stoxx Europe 600 Index and Standard & Poor’s 500 Index futures were both little changed. The Shanghai Composite Index capped its best week this year. U.S. oil slipped 0.3 percent, paring its 10th week of gains.

Federal Reserve Chair Janet Yellen speaks on the economy after data that’s estimated to show the consumer price index fell to 0.1 percent in April from 0.2 percent a month earlier. Mixed U.S. economic reports have prompted investors to push back estimates for when the Fed will begin raising rates, helping to drive equities to all-time highs. Following talks with Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel said greater efforts were needed to unlock bailout funds.

The Bloomberg dollar index, which tracks the greenback against 10 major peers, has climbed 1.6 percent this week after a report on Tuesday showed U.S. housing starts jumped to a seven-year high. It fell Thursday as existing home sales trailed estimates and jobless claims increased.

The euro strengthened 0.5 percent to $1.1167. The Australian dollar added 0.4 percent and the Swiss franc climbed 0.3 percent. Scandinavian currencies rallied.

The Stoxx 600 traded near a three-week high and headed for a 2.8 percent gain this week, the most since mid-April.

Cie. Financiere Richemont SA fell 1.8 percent after the maker of Cartier jewelry and Montblanc pens reported an unexpected decline in April sales. Swatch Group AG lost 2.5 percent.

Areva SA declined 4.3 percent after a report that Engie won’t buy the French builder of atomic plants.

Vodafone Group Plc gained 4.1 percent as Goldman Sachs Group Plc said the phone company is more likely to sell than buy assets.

S&P 500 E-mini futures expiring in June were little changed. The gauge is up for a third week, its longest streak since February.

Hewlett-Packard Co. climbed 0.9 percent in German trading after reporting quarterly profit that topped analysts’ estimates as corporate spending on servers picked up. Deere & Co. and Campbell Soup Co. report earnings today.

The MSCI Emerging Markets Index advanced 0.7 percent, trimming losses this week to 0.3 percent. A Bloomberg gauge of 20 developing-nation currencies gained for the first time this week, leaving it down 1.2 percent over the period.

The Shanghai Composite Index jumped 2.8 percent, extending gains this week to 8 percent. Weak manufacturing data spurred speculation the government may escalate measures to stimulate the economy, sending the gauge to the best weekly advance in five months.

The Hang Seng China Enterprises Index rose 2.1 percent to the highest since May 5. The Shenzhen Composite Index was poised for its best week since 2008.

Oil headed for the longest rising streak since futures trading started in 1983 after U.S. crude stockpiles shrank for a third week.

West Texas Intermediate futures fell to $60.53 a barrel, paring its weekly rise to 1.4 percent. Brent crude dropped 0.3 percent to $66.32.

U.S. crude inventories fell by 2.7 million barrels last week, the longest run of losses since September, according to Energy Information Administration data. Production dropped 1.2 percent to 9.3 million barrels a day, the biggest contraction since July.

Iron ore was poised for its largest weekly decline since early April on concern that rising output from the world’s largest producers will exceed demand from China, widening a global surplus. Ore with 62 percent content delivered to Qingdao has dropped 5.6 percent this week to $57.91 a dry metric ton, according to Metal Bulletin Ltd.

Gold advanced 0.7 percent to $1,213.28 an ounce, paring the biggest weekly loss since April. Silver gained 0.8 percent and platinum added 0.4 percent.

Nickel was poised for a second weekly loss, trading 1 percent lower at $12,875 a metric ton.

“The U.S. CPI is unlikely to surprise markets,” said Masashi Murata, vice president at Brown Brothers Harriman & Co. in Tokyo. “Speculation about the timing of when rates will be raised may have been pushed back, but the dollar is being bought and it’s on an uptrend. The euro is clearly overvalued. Even with the drop in European yields, the currency hasn’t adjusted.”

Dollar Index

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, has climbed 1.6 percent this week. It fell Thursday as housing data trailed estimates and U.S. jobless claims increased in the week.

The euro strengthened to $1.1155. The Australian dollar added 0.4 percent and the Swiss franc climbed 0.3 percent. Scandinavian currencies rallied.

The New Zealand dollar rose 0.5 percent to 73.84 cents, trimming its weekly loss to 1.2 percent. The South Pacific country’s currency is heading for a fifth weekly retreat, the longest streak since October.

German bunds due in a decade paid 0.61 percent and similar French notes offered 0.89 percent. Spanish, Italian and Portuguese 10-year bond yields fell at least three basis points.

The yen climbed 0.3 percent to 120.66 per dollar after snapping a five-day slump Thursday. The BOJ said it will continue its easing efforts until inflation hits 2 percent. The central bank said the consumer-price index will probably remain flat due to the effects of lower energy prices.

World Awash

“There’s lots of money floating around with QE in both Japan and in Europe certainly supportive of markets,” James Lindsay, who helps manage the equivalent of about $3 billion in assets at Nikko Asset Management NZ Ltd. in Auckland, said by phone.

The value of global equities rose to a record $72.97 trillion Thursday as the S&P 500 and MSCI All-Country World Index edged higher. Just four of the 19 groups on the Stoxx 600 Index climbed Friday after the gauge advanced through the previous four days.

Chinese stocks are extending a world-beating rally, with the combined value of mainland and Hong Kong equities surpassing the aggregate of Europe’s 10 largest markets.

The Shanghai Composite Index climbed 2.8 percent Friday and the Shenzhen Composite Index added 1 percent on its way toward a 12 percent weekly gain, the biggest since November 2008. Hong Kong’s Hang Seng China Enterprises Index rose 1.7 percent.

Crashes Ignored

Investors haven’t been deterred after some of Hong Kong’s highest-flying stocks of 2015 came crashing back to earth this week. Goldin Financial Holdings Ltd. and Goldin Properties Holdings Ltd., controlled by billionaire Pan Sutong, plunged more than 40 percent Thursday. A day earlier, Hanergy Thin Film Power Group Ltd. tumbled 47 percent in 24 minutes. The stocks had surged at least 500 percent in the prior 12 months.

Japan’s Topix erased an early decline to finish little changed after a five-day climb. The index finished the week up 2.5 percent. The Nikkei 225 Stock Average gained 2.7 percent this week and closed at a 15-year high on Thursday.

Wheat futures in Chicago climbed for a third day, rising 1 percent to $5.27 a bushel, near the highest level in a month. Prices advanced 2.7 percent this week, the third such increase and the longest winning streak since December. Heavy rains have spoiled the quality of the wheat crop in the U.S. Soybeans fell to the lowest level since October on rising global supplies.

(Source: Bloomberg)