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Stocks Set for Weekly Gain as Oil Rebound Boosts market

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Global stocks were headed for the biggest weekly gain in a month as a rebound in oil prices bolstered investor confidence amid signs economic growth outside of the U.S. remains lackluster. Norway’s krone led gains among the currencies of crude-exporting nations.

The MSCI All Country World Index held near a one-year high, while U.S. equity index futures were little changed after American benchmarks rallied to records on Thursday. Shanghai shares climbed the most in a month, buoyed by speculation of takeovers in the property industry. Crude rose to almost $44 a barrel amid speculation major producers will work together to stabilize the market after prices tumbled into a bear market last week. The yuan weakened as data pointed to a slowdown in China’s economy, while the krone and the Canadian dollar strengthened for the fifth day in a row.

Optimism central banks will remain supportive of growth is underpinning gains in equities as corporate earnings decline in the U.S., Europe and Asia. Monetary authorities in Australia, New Zealand and the U.K. cut benchmark interest rates to records this month, while the Bank of Japan and European Central Bank are using unprecedented stimulus to spur expansion. The probability of the Federal Reserve raising interest rates this year remains just shy of 50 percent in the futures market even as data indicate the U.S. economy is gaining momentum.

“As long as U.S. shares continue to rally, equity markets will remain stable,” said Michael McCarthy, chief market strategist in Sydney at CMC Markets. “The rally looks sustainable. What we’re looking at is a climb into the wall of worry into the year-end, with elevated risks given these abnormal monetary conditions.”

Germany’s economy expanded 0.4 percent in the second quarter, slowing from a 0.7 percent expansion in the previous three months, data showed Friday. China’s industrial output, household spending and investment also cooled in July, with growth falling short of economists’ estimates. U.S. retail sales are forecast to have increased for a fourth straight month, showing consumers continued to spend after the strongest quarterly advance since 2014.

Stocks

The MSCI All Country World Index was set for a 1.2 percent weekly advance as of 8:18 a.m. London time. It was little changed on the day as a measure of energy shares rose and telecom stocks retreated.

The Stoxx Europe 600 Index rose 1.6 percent this week to its highest level since May. A.P. Moeller Maersk A/S jumped as much as 4.7 percent after Denmark’s biggest company reported quarterly earnings. The MSCI Asia Pacific Index was set to close near a one-year high.

The Shanghai Composite Index rallied 1.6 percent on Friday as stake purchases by China Evergrande Group fueled optimism that the pace of merger activity in the property industry will accelerate. A gauge of real estate companies surged 4.7 percent as Langfang Development Co. and China Vanke Co., both targets of Evergrande, jumped by the daily 10 percent limit.

Hong Kong’s Hang Seng Index climbed 0.9 percent to a nine-month high. CK Hutchison Holdings Ltd. rose 2.6 percent and China Mobile Ltd. advanced for a second day after their earnings beat estimates.

"The rally in Hong Kong has fundamental support as earnings from its flagship companies are pretty strong,” said Wang Zheng, the Shanghai-based chief investment officer at Jingxi Investment Management Co. “Though the economic data are weak, they are still within an acceptable range to investors.”

Futures on the S&P 500 rose less than 0.1 percent. Analyst predict member companies’ income will contract 0.6 percent this quarter, which would mark the sixth consecutive period of declines

Commodities

Crude oil rose 0.7 percent to $43.80 a barrel in New York, headed for a 4.8 percent weekly jump. Informal discussions being held next month between members of the Organization of Petroleum Exporting Countries and non-OPEC producers may include possible action to stabilize the market, Saudi Arabia’s Energy Minister Khalid Al-Falih said in a statement, according to media reports, including Reuters. Global markets will continue to rebalance this year, the International Energy Agency said.

“The Saudi comments gave the market some life,” said Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney. “The talk is all about pushing the price higher and the market will speculate on whether they can actually pull a deal together. Calls from the IEA that the glut will start to shrink and consumption will pick up are also supportive.”

Copper fell 0.5 percent in London, trimming its weekly gain to 0.7 percent. Nickel lost 0.8 percent and aluminum was down 0.3 percent.

Currencies

The krone strengthened 3.3 percent versus the greenback this week, the best performance among major currencies and its biggest gain in 10 months. The currencies of Mexico and Canada, which like Norway are also oil-exporting nations, rose 2.7 percent and 1.5 percent, respectively.

The yuan weakened 0.1 percent, snapping a three-day advance. China’s economic data also weighed on the Australian and New Zealand dollars, which lost 0.2 percent. The South Pacific nations both count China as their biggest trading partner. The Bloomberg Dollar Spot Index rose 0.1 percent, reducing its weekly loss to 0.6 percent.

One-month forwards for Thailand’s baht fell for the first time this week after a spate of bombings in tourist destinations including Hua Hin and Phuket that killed at least two people. The nation’s financial markets are shut Friday for a holiday.

Bonds

The yield on U.S. Treasuries due in a decade declined four basis points this week to 1.55 percent. The rate on similar-maturity sovereign bonds in Australia increased three basis points to 1.91 percent and Japan’s fell by half a basis point to minus 0.105 percent.

China’s 10-year bonds yield 2.68 percent, the least since 2009. Demand for haven assets is rising in the nation as economic data worsen and corporate defaults climb. Negative yields in countries including Germany, Japan and Switzerland are also boosting overseas interest in Chinese sovereign debt, with foreign buyers having increased their holdings in June by the most in two years.

Source: Bloomberg