Equities stop bleeding as Fed minutes loom

January 7, 2015 09:33 AM

U.S. stocks climbed following the worst start to the year since 2008 on speculation Federal Reserve meeting minutes will confirm continued monetary support as the economy grows. European stocks rose and the euro tumbled as the threat of deflation bolsters the case for stimulus.

The Standard & Poor’s 500 Index increased 0.6% at 9:32 a.m. in New York, halting its worst losing streak in 13 months. The Stoxx Europe 600 Index advanced 1%. The yield on 10-year Treasuries rose two basis points to 1.98%. The euro slid to an eight-year low against the dollar after inflation slowed more than forecast. Brent crude traded near the lowest close since 2009 after briefly dipping below $50 a barrel.

The S&P 500 had plunged 4.2% over five days and 2.7% since the end of 2014. Fed minutes may offer insight into the timing of the first interest-rate increase since 2006, as data today showed the trade deficit narrowed more than forecast in November and companies added more workers than estimated last month. Euro-area consumer prices retreated below zero for the first time since 2009, as oil’s decline is frustrating central bank efforts to stave off deflation.

“We had some good economic news and the market got tired of going down,” Randy Bateman, the chief investment officer of Huntington Asset Advisors, which manages about $2.3 billion in the funds, said by phone. “There’s some interest as to what the Fed’s mindset is right now. They certainly don’t have to worry about inflation and if employment is doing OK, I don’t see them in any rush to do anything.”


Patient Fed

The Fed pledged to be patient in its approach to raising rates, while Chair Janet Yellen said after the December meeting the central bank will probably hold rates near zero through at least the first quarter. The minutes will be released at 2 p.m. in Washington.

Companies in the U.S. added 241,000 workers in December, figures from ADP Research Institute showed today. The trade gap shrank 7.7% to $39 billion, the smallest since December 2013, Commerce Department figures showed today.

A combination of rising supply as domestic production picks up and slower growth overseas that’s reducing demand is leading to a rout in oil prices that has continued into 2015. Outside of fuel, Americans bought record amounts of consumer goods that shows the world’s largest economy is strengthening.

“The U.S. has clearly been ahead of the game,” Peter Dixon, global equities economist at Commerzbank AG in London, said by phone. “Growth is on a stronger footing. Oil has gone down but in some ways the shock is way overdone. I’d expect markets to recoup some of the ground they’ve lost in recent weeks.”


Crude Price

Brent crude was little changed at $51.11 a barrel, paring its first drop below $50 since 2009. West Texas Intermediate climbed 0.8% to $48.67 a barrel.

Crude stockpiles in the U.S., already at the highest for the time of year in three decades, probably expanded by 700,000 barrels last week, a Bloomberg News survey showed before an Energy Information Administration report today.

European stocks rose the most in almost three weeks amid investor optimism that the weaker-than-forecast inflation report bolsters the case for the European Central Bank to begin quantitative easing.

Prices slid 0.2% in December, the European Union’s statistics office said. Economists had predicted a decline of 0.1%.

The European equity gauge is still down 4.6% from an almost seven-year high reached last month, amid a slump in oil- and-gas companies and growing concern over Greece as Prime Minister Antonis Samaras said this month’s election could lead to the nation exiting the euro area.


Emerging Equities

The MSCI Emerging Markets Index rose for the first time in five days, adding 0.6%, as benchmark gauges in Brazil, Poland and Thailand gained at least 1.4%. The Shanghai Composite Index added 0.7%. Markets were closed in Moscow for the Russian Orthodox Christmas holiday.

Shares in the Middle East rebounded, with the Dubai Financial Market Index climbing 4.4% and rallying from a three-week low. Abu Dhabi’s ADX General Index ended a three-day decline, rising 2.6%, and Saudi Arabia’s Tadawul All Share Index increased 0.9%.

Gold fell for the first time in four days, dropping 0.4% to $1,213.41 an ounce. Sliver slid 1.2% and palladium declined 0.6%.

The U.S. currency rose against 11 of its 16 major peers, climbing 0.6% to 119.14 yen, advancing from yesterday’s three-week low. The euro declined 0.4% to $1.1844 per euro.

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