Global stocks rebounded from the lowest levels in a week, crude climbed toward $48 a barrel and Treasuries fell with gold as investors shifted back toward risk assets before tomorrow’s U.S. payrolls report.
The S&P 500 Index edged toward its highest level since Britain’s vote to secede from the European Union, reducing its post-Brexit slide to less than 0.5 percent. The Stoxx Europe 600 Index gained for the first time this week. Emerging markets rose and the dollar fell amid a subdued outlook for higher U.S. rates. Treasuries retreated, while gold halted a rally.
Global markets turned less risk averse as attention shifted to Friday’s U.S. jobs report for clues on the Federal Reserve’s policy decision. The central bank cited concern that job creation was faltering as they kept rates unchanged the week before Britain’s secession vote, according to meeting minutes. While services data signaled the U.S. economy may have been gaining speed, the jobs data will be key to perceptions of where the Fed stands.
“If I see the 10-year Treasury yield moving up a bit and the pound strengthening, I’ll get a bit more comfortable thinking that other investors are re-embracing risk,” said Brian Jacobsen, chief portfolio strategist with Wells Fargo Funds Management LLC, which oversees $242 billion. “Right now I’m still a bit on tenterhooks. If the labor market is continuing to improve and inflation is migrating its way back to its target, the next story is that people probably have to shift their expectations for a December 2016 rate hike.”
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Stocks
The S&P 500 rose 0.3 percent to 2,105.97 at 10:21 a.m. in New York. The index has advanced 5 percent since June 27 and is now 0.7 percent below its last closing price before the Brexit vote sparked a two-day rout of almost 6 percent.
ADP Research Institute reported Thursday firms added 172,000 jobs in June, more than the 160,000 estimate in a Bloomberg survey, and Labor Department data showed jobless claims unexpectedly declined last week to the lowest level since mid-April.
“We’re in this stutter-step economy right now where we get some bright spots from time to time but we’re gun shy because we’re so used to having these bright spots squashed subsequently by some pretty tough data,” said Katie Nixon, chief investment officer of wealth management at Northern Trust Corp. “People are still focused on the Fed and it seems to be capturing a lot of attention and clearly there’s an enormous amount of uncertainty.”
The Stoxx 600 climbed 1.6 percent, halting the longest losing streak in three weeks. All 19 industry groups advanced, with a gauge of banks climbing 1.1 percent as a group after closing at the lowest level since 2011 on Wednesday.
The MSCI Emerging Markets Index gained for the first time in three days, rising 1.1 percent. Samsung Electronics Co. contributed the most to the advance, climbing 2 percent, after reporting its biggest operating profit in more than two years. Benchmarks rose at least 1 percent in Hong Kong, Hungary, Poland, South Africa and South Korea.
Currencies
The pound rose 0.2 percent to $1.2960, after touching $1.2798 a day earlier.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed following a 0.2 percent drop on Wednesday. Futures put the probability of the Fed raising interest rates by December at 15 percent, down from 50 percent at the time of the U.K.’s June 23 referendum.
The Fed minutes “play into our core view that the Fed will now delay a further rate hike until December, at the earliest,” Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand Ltd., said in an e-mail to clients. “The market is certainly pricing in ‘gradual’ rate hikes.”
The yen strengthened 0.2 percent to 100.918 per dollar, taking its post-Brexit rally to 5 percent. Bank of Japan Governor Haruhiko Kuroda said in a speech to his bank’s branch managers Thursday that the country’s consumer-price index is likely to remain slightly negative for the time being.
The MSCI Emerging Markets Currency Index advanced 0.4 percent, headed for its first increase in four days. South Korea’s won jumped 1 percent, and South Africa’s rand gained 0.4 percent. China’s yuan strengthened 0.16 percent, after sliding to the lowest level since November 2010 on Wednesday.
Commodities
Oil extended gains as data from the American Petroleum Institute, an industry group, showed the nation’s crude stockpiles dropped by 6.7 million barrels last week, easing a glut. The U.S. Energy Department will release its own inventory data at 4 p.m. New York time Thursday. West Texas Intermediate rose 1.3 percent to $48.04 a barrel and Brent gained 1.1 percent to $49.33.
Gold futures fell 0.9 percent to $1,354.40 an ounce in New York. Global gold holdings topped 2,000 metric tons for the first time since July 2013 amid rising demand for havens from the fallout from the U.K. vote.
Bonds
The yield on U.S. Treasuries due in a decade increased four points to 1.40 percent, after sinking to an unprecedented 1.32 percent in the last session. Billionaire bond investor Bill Gross said Wednesday that sovereign bonds are “too risky” with yields in many developed markets near all-time lows.
German bonds slipped, after 10-year yields touched the lowest level on record on Wednesday. The yield on similar-maturity Spanish bonds added two basis points to 1.19 percent while that on Italian 10-year bonds added one basis point to 1.25 percent.
Japan’s two-year bond yield dropped one basis point to an all-time low of minus 0.345 percent. The nation’s 10-year rate was minus 0.28 percent, near the record of minus 0.285 percent reached on Wednesday.