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(Bloomberg) -- Bonds in Europe gained after a report that the European Central Bank may continue asset purchases for at least nine months after it starts tapering in January. Stocks advanced after Chinese trade data underscored the resilience of the global recovery.
The Stoxx Europe 600 Index climbed, led by steelmakers and miners as most industrial metals gained and WTI crude rose back above $51 a barrel. The dollar nudged higher as investors awaited the U.S. latest inflation data. Sterling gained on a report that the EU may offer the U.K. a two-year transition period to stay in the union, though it pared the advance after European Commission President Jean-Claude Juncker said “new problems” were emerging “day after day” in the Brexit withdrawal process. The euro declined.
European Central Bank officials are considering reducing quantitative easing to 30 billion euros ($36 billion) a month from the current pace of 60 billion euros, according to officials familiar with the debate. While the central bank’s governors are split on the need to identify an end date for purchases, a pledge to keep buying bonds until September -- with the proviso that it could be extended if needed -- may offer grounds for compromise, they said.
“For the ECB, duration of the program should trump monthly purchases,” Royal Bank of Canada economists including Sam Hill said in a client note. “This should anchor front-end rates firmly, through the forward guidance linking interest rates to the duration of the bond buying, and steepen the yield curve.”
In the U.S., the Trump administration’s tax plan clouded up as the president was said to voice frustration with certain aspects of the existing framework. Some Congressional Republicans have aired concerns, though Treasury Secretary Steven Mnuchin reiterated his confidence that a plan will get passed this year. Data Friday on prices and retail sales may give more clues about the Fed’s policy path amid a debate about whether low inflation is temporary or permanent.
“The hurricane effects will mean that interpretations of the data will be difficult,” John Cairns, a strategist at Rand Merchant Bank in Johannesburg, said in a client note. “Anyway, the Fed has made it clear that it intends to raise rates in December even if inflation remains weak.”
Elsewhere, gold traded little changed and bitcoin surged to a fresh record above $5,600.
Terminal subscribers can read more in our Markets Live blog.
Highlights this week:
- Austria may vote a far-right party into power on Oct. 15.
- President Trump may decertify Iran’s nuclear deal on Friday afternoon in Washington, saying it isn’t in the U.S.’s interest.
- Today’s U.S. September CPI report will be skewed by hurricane impacts.
Here are the main moves in markets:
- The Stoxx Europe 600 Index gained 0.4 percent as of 7:55 a.m. New York time, the highest in more than four months.
- The U.K.’s FTSE 100 Index declined 0.2 percent.
- Germany’s DAX Index rose 0.4 percent to the highest on record.
- Futures on the S&P 500 Index increased 0.1 percent.
- The Bloomberg Dollar Spot Index gained 0.1 percent.
- The euro fell 0.2 percent to $1.181.
- The British pound gained 0.1 percent to $1.3278, hitting the strongest in more than a week with its fifth consecutive advance.
- The Japanese yen climbed 0.1 percent to 112.20 per dollar.
- The yield on 10-year Treasuries increased one basis point to 2.33 percent.
- Germany’s 10-year yield dipped three basis points to 0.42 percent, the lowest in more than two weeks.
- Britain’s 10-year yield decreased one basis point to 1.363 percent.
- Spain’s 10-year yield fell three basis points to 1.604 percent, the lowest in three weeks.
- West Texas Intermediate crude gained 2 percent to $51.61 a barrel, the highest in more than a week.
- Gold decreased 0.1 percent to $1,292.78 an ounce.
- Copper increased 0.4 percent to $3.13 a pound, hitting the highest in almost five weeks with its fifth consecutive advance.
- Japan’s Nikkei 225 was up 1 percent, finishing the week at the highest since 1996. Fast Retailing Co., the gauge’s biggest component, climbed 5.5 percent as overseas sales rose. The broader Topix index rose 0.5 percent.
- Hong Kong’s Hang Seng Index was little changed, while China’s benchmark gained 0.2 percent and South Korea’s Kospi index fell 0.1 percent.
--With assistance from Adam Haigh Andreea Papuc Cecile Gutscher Christopher Anstey and Heather Burke
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