Asian stocks rose, with the benchmark index heading for a monthly gain, and European index futures advanced on speculation central banks from the U.S. to Japan will maintain stimulus. The yen weakened and crude fell.
The MSCI Asia Pacific Index advanced 1 percent as of 7:07 a.m. in London, while Japan’s Topix rallied 1.7 percent. Euro Stoxx 50 Index contracts gained 0.4 percent and Standard & Poor’s 500 Index futures added 0.3 percent. The yen weakened against all its major peers, while the ringgit strengthened 0.7 percent on Malaysia’s plans to cut the budget deficit. A gauge of Treasury market volatility fell to a five-month low. Oil declined 0.4 percent in New York.
The Federal Reserve will refrain from paring stimulus at a two-day policy meeting that begins tomorrow, according to a Bloomberg poll. The Bank of Japan will continue to buy bonds until it achieves a 2 percent inflation target, Deputy Governor Kikuo Iwata said yesterday. The U.S. will report industrial output today. Millions of U.K. commuters were advised to stay at home as the worst storm for five years forced rail operators across southern Britain to cancel rush-hour services.
“We are in a liquidity-fueled stock boom,” Matthew Sherwood, head of investment markets research in Sydney at Perpetual Investments, which manages about $25 billion, said in an e-mail. “Rising valuations have never stopped overheating markets, so the market rise could be extended, as long as central bank stimulus remains in place.”
The Stoxx 600 Europe Index trades at 14.8 times earnings, the highest level since the start of 2010, according to weekly data compiled by Bloomberg. The gauge has rallied 14 percent this year following a similar-sized gain in 2012.
About two stocks advanced for each that that fell on MSCI’s Asian benchmark index today, with technology and industrial companies leading gains. The Topix rebounded from its biggest slump in two months. Australia’s S&P/ASX 200 Index rose 1 percent to the highest level since June 2008. Hong Kong’s Hang Seng Index increased 0.5 percent.
Zoomlion Heavy Industry Science & Technology Co. jumped 5.2 percent in Hong Kong after a Chinese newspaper apologized for publishing stories questioning the company’s finances. China Oilfield Services Ltd. surged 7.2 percent after the company said nine-month earnings rose. Chong Hing Bank Ltd. tumbled 8.2 percent in the city after the Hong Kong lender accepted a $1.5 billion takeover bid from Yue Xiu Group.
Komatsu Ltd. and China Telecom Corp. are among Asian companies reporting earnings today, while Apple Inc. is also due to announce results. Fifty-three percent of the 105 companies in the Asian gauge tracked by Bloomberg that announced results so far this quarter have trailed analyst estimates.
The Kospi index gained 0.7 percent as foreign investors boosted their holdings of Korean stocks for a record 42nd day, lured by a widening current-account surplus, strengthening currency and the fastest economic growth in almost two years. Samsung Securities Co. predicted inflows will accelerate, while BlackRock Inc., the world’s largest money manager, has been buying on expectations profit growth will quicken.
Chinese brokerages are betting the biggest jump in money-market rates since June’s record cash crunch is a sign of strength in the nation’s economy rather than finance-industry weakness. The central bank has refrained from injecting funds into the banking system since Oct. 17, driving the benchmark seven-day repurchase rate 138 basis points higher to 4.88 percent last week, the biggest increase in four months. It climbed a further five basis points today.
The one-year swap contract, the fixed payment needed to lock in the repo rate for 12 months, rose three basis points to 4.11 percent. That compares with a 5.06 percent peak in June, when investors were concerned overstretched banks would default on payments.
The Federal Open Market Committee starts its two-day meeting tomorrow after U.S payrolls rose less than projected last month and a 16-day government shutdown took at least $24 billion out of the economy. The Fed is likely to delay lowering monthly bond purchases until March, according to a Bloomberg News survey of economists conducted Oct. 17-18.
Three-month implied volatility on 10-year interest-rate swaps was 74.44, a level not seen since May. The average over the past year is 81.41. The gauge is a measure of projected yield fluctuations over the next 90 days. It has fallen from 116.91 in September when some investors speculated the Fed would begin trimming its bond purchases that month. Treasuries were little changed as investors prepared to bid on $96 billion of debt over three days starting today.
Bank of Japan
The yen declined 0.2 percent to 134.75 per euro before a BOJ meeting this week at which policy makers will decide whether to continue buying more than 7 trillion yen ($72 billion) of Japanese government bonds each month to help end deflation. The currency fell 0.2 percent to 97.65 per dollar.
Australia’s dollar rose 0.1 percent to 95.98 U.S. cents following a 1 percent slide last week that was its biggest decline since August. The ringgit advanced as much as 1.1 percent to 3.1232 per dollar, the strongest since June 17, after Malaysia announced plans for a consumption tax and scrapped sugar subsidies to trim its budget deficit.
West Texas Intermediate crude fell to $97.55 a barrel in electronic trading in New York. Copper dropped 0.1 percent to $7,175 a metric ton. Lead slid 0.4 percent. Gold declined 0.2 percent to $1,348.69 an ounce.
The U.K. is braced for hurricane-force winds and flooding caused by torrential rain after the Met Office issued an amber alert and warned of wind gusts in excess of 80 miles per hour (129 kilometers per hour) overnight. The Environment Agency posted over 140 flood alerts.
The storm, which developed over the Atlantic and has been strengthened by a strong jet stream and warm air close to the U.K., is forecast to hit London and the southeast around 7 a.m., according to forecasters.
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