Stocks Near 3-Week High Amid Yellen Countdown as Oil Fall

Global equities held near a three-week high and the dollar rose versus most peers before a speech by the head of the Federal Reserve. Oil fell toward $49 a barrel and gold snapped a seven-day losing streak.

The MSCI All Country World Index was headed for a weekly advance of more than 2 percent. Japan’s Topix climbed to a one-month high as local newspapers reported the likely postponement of a sales-tax increase and a drop in consumer prices reinforced expectations the central bank will add to record stimulus. The British pound was the biggest gainer among major currencies this week as polls showed growing support for the U.K. to remain in the European Union. Russia’s ruble and the Canadian dollar weakened on Friday as oil pared its weekly advance.

Investor sentiment picked up this week, with global stocks and emerging-market currencies trimming their losses for May. Leaders from the Group of Seven nations are meeting in Japan and are set to issue a communique saying they’ve strengthened their economies sufficiently to avoid a crisis. China said Thursday it has room to borrow more to finance spending needed to shore up growth and Asahi newspaper reported that Japan will postpone a planned sales-tax hike. Fed Chair Janet Yellen is due to speak Friday, after a string of her colleagues in the past two weeks indicated a willingness to tighten policy.

“We are still a little cautious,” said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion. "Yellen is likely to continue with the rhetoric of wanting to hike and that’s their plan. Equity markets still offer value on a medium-term basis and it’s certainly the only place where you’re getting any sort of yield."

Jeffrey Gundlach, chief executive of DoubleLine Capital LP in Los Angeles, said he expects a dovish speech from Yellen and predicts the Fed will refrain from raising interest rates in June unless traders in the futures market assign a probability of at least 50 percent to such a move. The odds pulled back to 28 percent on Thursday from 34 percent in the prior session, according to Fed Funds futures.

Japan’s core consumer prices fell 0.3 percent in April from a year earlier, following a similar decline the previous month, data showed Friday. Taiwan joins the U.S. in posting an update on first-quarter gross domestic product and a gauge of American consumer confidence is also due. Colombia’s central bank will probably raise its key rate for a ninth straight month to help contain inflation. Financial markets in the U.S. and the U.K. will be closed Monday for holidays.

Stocks

The Stoxx Europe 600 Index was little changed on the day and up about 3 percent for the week as of 8:14 a.m. London time. The MSCI Asia Pacific Index added 0.6 percent, set for a 2 percent weekly advance.

The Shanghai Composite Index fell as much as 0.5 percent, before erasing its loss. Data on Friday showed industrial companies’ profit growth slowed to 4.2 percent in April from 11 percent the previous month. The finance ministry said the government’s debt is equivalent to 39 percent of GDP, relatively low by global standards, and there’s scope for more leverage.

Lenovo Group Ltd. fell to its lowest since 2011 in Hong Kong after the company announced revenue and earnings that fell short of analysts’ estimates. Toshiba Corp. jumped 11 percent to this year’s high after JPMorgan Chase & Co. upgraded its recommendation on the stock. Hyundai Merchant Marine Co. surged 30 percent after Korea Development Bank said the company has made progress in negotiating discounts on leased vessels as part of a debt revamp plan.

Futures on the S&P 500 Index were little changed, after the gauge ended Thursday near to a one-month high. Evidence is mounting the U.S. economy is solid enough to merit Fed action, with a measure of data surprises surging to the highest since the start of last year.

Currencies

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, rose 0.1 percent after losing 0.2 percent in each of the last two trading sessions.

The MSCI Emerging Markets Currency Index rose 0.3 percent this week, snapping a run of three weekly losses. South Korea’s won and Taiwan’s dollar were Asia’s best performers, strengthening at least 0.7 percent versus the dollar during the period.

The currencies of oil-exporting nations pared their weekly gains amid Friday’s retreat in oil prices. The Canadian dollar dropped 0.3 percent and the ruble weakened 0.4 percent. Both were still up at least 0.7 percent for the week.

The pound strengthened 1 percent this week. A poll by former Conservative lawmaker Michael Ashcroft showed almost 65 percent of voters believe the U.K. will remain in the EU after a June 23 referendum.

Commodities

West Texas Intermediate crude slipped 0.8 percent to $49.09 a barrel. It’s gained about 3 percent this week, boosted by a drop in U.S. oil inventories and output, and exceeded $50 in the last session for the first time this year. OPEC is unlikely to set a production target when it meets June 2 as it sticks with Saudi Arabia’s strategy of squeezing out rivals, according to analysts surveyed by Bloomberg.

Gold was up 0.1 percent, after earlier dropping as much as 0.7 percent to a three-month low of $1,211.68 an ounce. Bullion has retreated this month as speculation mounted that the U.S. will raise borrowing costs as early as June, a move that would erode the appeal of non-interest-bearing assets.

“Gold could test $1,200, a scenario that will grow more likely if the market consensus around Fed tightening builds,” said Jordan Eliseo, Sydney-based chief economist at trader Australian Bullion Co.

Copper and aluminum rose to two-week highs, while zinc gained ground for a third day.

Bonds

The yield on U.S. Treasuries due in a decade was little changed at 1.83 percent, while that on similar-maturity Japanese debt fell one basis point to minus 0.12 percent.

Societe Generale SA sold 120 billion yen ($1.1 billion) of Samurai bonds Friday, the biggest deal this year in the Japanese yen debt market for overseas issuers. The issuance included seven-year notes at a yield of 0.28 percent. Toyota Motor Corp. sold 20-year yen bonds at a yield of 0.343 percent.

Source: Bloomberg