Euro, Pound Rally as Traders Adjust Rates Outlook: Markets Wrap: Bloomberg

The euro strengthened to the highest level in more than a year and the British pound gained a seventh day as expectations grew that financial conditions will be tightened as economic growth picks up. Banking stocks outperformed and oil extended its winning streak.

Even after European Central Bank officials tried to play downthe hawkish aspects of a speech this week from Mario Draghi, the euro continued its advance as odds for a rate hike this year climbed. Data showing euro-area economic confidence jumped to the highest level in a decade will have bolstered the market’s view. In the U.K., where the central bank chief has been even more explicit, the pound is on the longest winning streak since 2015.

Banks led stock gains in Europe and Asia amid the prospect for higher rates and in the wake of Wednesday’s U.S. stress test results, and miners jumped with commodity prices. The broader gauge still fell, led lower by utilities.

Still, global equities are poised for the best first half of a year since 1998, gaining 11 percent to a record. Investors are putting their faith in the robustness of earnings as the economy continues its recovery, shrugging off a host of worries from oil’s slump into a bear market to political wrangling in Washington. But risks remain: markets swung this week as the debate on normalizing central bank policy intensified after nine years of stimulus.

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Here are some key upcoming events and data releases:

• The Trump travel restrictions start from 8 p.m. New York time today, a person familiar said.
• A packed week of Fed speakers continues with St. Louis’ James Bullard, who recommends no more rate hikes this year.
• The Commerce Department releases its personal income and spending report for May.
• The U.K. House of Commons will vote on Theresa May’s government program today.
• China’s PMI might have declined in June after unexpectedly remaining unchanged in May, reflecting government offers to cut overcapacity and leverage. That reading is due Friday.
• Japan’s calendar is even heavier with economic data on Friday, with reports due on inflation, factory output, unemployment, household consumption and housing starts.

These are the main moves in markets:

Currencies

• The Bloomberg Dollar Spot Index slipped 0.1 percent as of 11:21 a.m. in London, dropping for a third day to the lowest since October.
• The euro increased 0.3 percent to $1.1411, the highest level since last year’s Brexit vote.
• The pound climbed 0.3 percent to $1.2958, heading for a seventh straight day of gains, the longest winning streak since April 2015.
• The Canadian dollar rose 0.1 percent after jumping 1.2 percent on Wednesday as Bank of Canada Governor Stephen Poloz reiterated he’s considering tighter policy.

Stocks

• The Stoxx Europe 600 Index fell 0.3 percent. Banks bucked the trend, gaining 1.5 percent. Utilities fell 1.2 percent.
• Futures on the S&P 500 Index added 0.1 percent. The underlying gauge rose 0.9 percent on Wednesday, bouncing back from a loss of 0.8 percent. It’s on pace for a seventh straight quarterly advance. The Nasdaq Composite Index jumped 1.4 percent on Wednesday.

Commodities

• WTI futures advanced 0.6 percent to $44.99 a barrel. Prices gained as government data showed a drop in U.S. gasoline supplies that have remained stubbornly high at the start of the summer driving season.
• Gold fell 0.2 percent to $1,246.83 an ounce.
• Copper futures jumped 0.7 percent, advancing for a seventh day.

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.24 percent, after gaining two basis points on Wednesday and jumping seven basis points in the previous session.
• The yield on U.K. gilts advanced four basis points to 1.2 percent. French 10-year yields added four basis points, as did those of 10-year German bunds.

Asia

• China’s yuan strengthened for a third day, with the offshore currency advancing 0.3 percent as President Xi Jinping kicks off a landmark visit to Hong Kong. The Hang Seng Index climbed 1.1 percent and the Shanghai Composite added 0.5 percent.
• Singapore’s Straits Times Index rallied 1.4 percent, the most since November. Australia’s S&P/ASX 200 Index rose 1.1 percent, with banks and basic materials shares having the biggest impact. South Korea’s Kospi index advanced 0.6 percent to a record.

Source: Bloomberg