European stocks’ three-month high as euro drops puts onus on ECB

30 November 2015
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European stocks hovered around a three-month high, the euro touched its weakest level since April and the yield gap between German and U.S. notes reached the widest in nine years as traders prepared for the European Central Bank to ramp up stimulus later this week.

The euro headed for its worst month versus the dollar since March with economists surveyed by Bloomberg unanimously predicting the ECB, led by President Mario Draghi, will take additional steps to boost inflation. The lira advanced after Turkey and the European Union agreed on measures to counter terrorism and help stem a refugee crisis, backed by EU aid. While carmakers led gains in Europe stocks, miners fell as shares in BHP Billiton Ltd. dropped to the lowest since November 2008 after iron ore futures in Singapore sank below $40 a metric ton for the first time.

The ECB’s monetary-policy decision on Thursday is just one of a slate of key economic events this week. The International Monetary Fund will decide whether to grant China’s yuan status as a reserve currency, OPEC members will meet to discuss oil production, Federal Reserve Chair Janet Yellen will appear before Congress, and then on Friday, the monthly U.S. payrolls report is due. With the odds of a U.S. interest-rate increase in December holding above 70 percent, the focus is shifting to policy divergence and how other central banks may respond to Fed tightening.
“It’s all about assessing your positions ahead of the ECB this week,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “While I think Draghi will deliver, the market has already been priced quite aggressively for a deposit- rate cut.”

Stocks
The Stoxx Europe 600 Index climbed 0.2 percent at 10:46 a.m. in London, and E-mini futures on the Standard & Poor’s 500 Index were little changed.
Volkswagen AG and PSA Peugeot Citroen advanced more than 2 percent. Aryzta AG, a Swiss owner of bakery chains, jumped 7 percent after reporting quarterly sales that met analysts’ estimates.

BHP Billiton tumbled 5.6 percent in London as Brazil sought as much as 20 billion reais ($5.2 billion) compensation for a dam collapse at an iron-ore venture co-owned with Vale SA. Delta Lloyd NV sank 6.5 percent as the Dutch insurer said it will raise as much as 1 billion euros ($1.06 billion) by selling stock in a rights offer. Aberdeen Asset Management Plc fell 4.4 percent after the money manager reported quarterly outflows.

Currencies
The euro fell as low as $1.0563, its weakest level since April. The currency has weakened 3.9 percent in November, its biggest loss since a 4.2 percent decline in March, when the ECB embarked on its 1.1 trillion-euro asset-purchase program.
Turkey’s lira rose 0.5 percent after its biggest weekly decline since March and the Borsa Istanbul 100 Index gained 0.2 percent. The EU pledged to restart Turkey’s membership bid and a package of 3 billion euros in assistance for refugees in return for Turkey bolstering its border controls.

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