London - Global equities advanced with commodities and emerging markets on speculation the US economy is strong enough to sustain growth while only triggering a gradual increase in interest rates.
The MSCI All Country World Index was headed for its highest close in almost a year, extending Friday’s advance that was spurred by a bigger-than-estimated increase in American payrolls. Perceived investment-grade corporate credit risk fell to the lowest in about a year.
The pound dropped and UK government bonds rose as the Bank of England begins its latest round of quantitative easing. Thailand’s shares gained after voters backed a new constitution, while South Korean assets were buoyed by a debt-rating upgrade. Crude traded above $42 a barrel, the highest in two weeks, and aluminum advanced.
US data showing improvements in employment, retail sales and factory output have bolstered confidence that the world’s biggest economy can withstand faltering growth elsewhere, reviving speculation that the Federal Reserve will raise interest rates this year.
Any moves may be gradual - Fed board member Jerome Powell warned that America is trapped in a prolonged period of subdued growth that requires lower official rates than initially expected, the Financial Times reported.
“There’s a positive follow-through from Friday’s payroll numbers as it shows strength in the US economy,” said Michael Hewson, a market analyst at CMC Markets in London.
The MSCI All-Country World Index climbed 0.4% as of 11:45. The Stoxx Europe 600 Index rose 0.2%, taking its three-day rebound to 2%. The number of shares changing hands on the Stoxx 600 was 37% below the 30-day average.
A gauge of banks led gains, with Barclays adding 3.3% after Exane BNP Paribas upgraded the UK lender to outperform, similar to buy, from neutral. BHP Billiton and Anglo American climbed 3.4%, pushing miners higher as commodity prices increased.
PostNL surged 12% after the Dutch mail-delivery company forecast a resumption of dividend payments in 2017. Mediobanca gained 3.2% after La Stampa reported that French investor Vincent Bollore may increase his 7.9% stake in the Italian investment bank to as much as 23%.
Airbus Group fell 0.9% after saying that the the UK Serious Fraud Office has opened a criminal investigation into allegations of fraud, bribery and corruption relating to some of the planemaker’s third-party consultants.
S&P 500 futures added 0.3% after the US gauge hit an all-time high. Nasdaq 100 contracts also rose 0.3%. The Nasdaq Composite Index closed at a record on Friday for the first time in a year.
The MSCI Emerging Markets Index advanced 1% to a one-year high, with benchmarks in Hong Kong, Thailand and Turkey gaining at least 1.4%. South Korea’s Kospi rose 0.7%.
The Japanese yen slid 0.5% and New Zealand’s dollar lost 0.3% as the Bloomberg Dollar Spot Index held near a one-week high.
Odds on the Fed increasing rates by December rose to 47% in the futures market after the US payrolls report, up from 37% on Thursday. While America’s jobs report surprised on the upside, Chinese data on Monday showed exports from the world’s biggest trading nation declined 4.4% in dollar terms from a year earlier in July and its imports dropped 12.5%.
Russia’s ruble strengthened 0.7%, leading gains among the currencies of oil-exporting nations. The won advanced 0.2%, having recovered from a loss of as much as 0.6% after S&P raised South Korea to AA, its third-highest ranking.
The pound headed for its longest run of declines since before the UK’s decision to leave the European Union. Sterling slid 0.2% to $1.3051, falling for a fourth day.
The Bloomberg Commodity Index rose as much as 0.4% to the highest since August 1 as West Texas Intermediate crude oil gained 1.3% to $42.34 a barrel. Copper climbed 0.6% in London, aluminum was up 0.7% and nickel headed for the highest close in a year.
Gold fell 0.4% extending Friday’s losses. The prospect of higher US interest rates dim the appeal of the precious metals versus yield-paying assets.
Soybeans climbed as much as 1.5% in Chicago amid strong demand for US exports. Wheat also advanced amid concern about the outlook for European crops.
Italy’s government bonds declined for the first time in three days after the nation’s sovereign rating came under review before a proposed constitutional referendum. Yields on the nation’s 10-year debt climbed from a 17-month low reached Friday after DBRS said that it was reevaluating its A (low) credit grade, with negative implications.
The yield on Treasuries due in a decade fell one basis point to 1.58%, having increased by nine basis points on Friday. That compares with the all-time low of 1.32% reached last month.
The cost of insuring corporate debt against default fell for a third day. The Markit iTraxx Europe Index of credit-default swaps on highly rated companies dropped one basis point to 66 basis points. A gauge of swaps on junk-rated companies declined six basis points to 311 basis points.