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BLBG: Europe Stocks Drop as S&P 500 Futures Climb With Dollar
 
European stocks fell and Norway’s krone dropped with oil. U.S. stock-index futures (SPX) and the dollar climbed before the Federal Reserve’s policy decision, while the ruble reversed gains.

The Stoxx Europe 600 Index dropped 0.5 percent at 10:20 a.m. in London, the seventh decrease in eight days. The krone declined against all its 16 major peers as oil fell in New York and London. Standard & Poor’s 500 Index futures added 0.6 percent and the Bloomberg Dollar Spot Index climbed 0.4 percent, while Treasuries fell. The ruble extended a slide after the country’s finance ministry started selling foreign currency.

More than $2.7 trillion was erased from the value of equities worldwide in less than a month, and a gauge of volatility across asset classes reached a 15-month high as oil sank to a five-year low. The Fed ends a two-day meeting today, with economists predicting that Russia’s currency crisis and plunging oil prices won’t stop policy makers from dropping a vow to keep interest rates low for a “considerable time.” They forecast U.S. inflation probably fell in November, while it was at a five-year low in the euro area.

“It’s most likely that the Fed will refer to geopolitical or external risks, but we still expect the ‘considerable time’ to be dropped,” said Michael Leister, a senior strategist at Commerzbank AG in Frankfurt. “The first rate increase could take place as early as June, and the pressure of rising yields will be more evident at the short end of the market than in longer-dated maturities.”

Five-Year Low

Oil futures traded near the lowest level since May 2009 as Russia echoed the strategy of the Organization of Petroleum Exporting Countries, which is refraining from curbing supply to tackle a global surplus. Output from Russia, the world’s largest crude producer, will be similar to this year’s 10.6 million barrels a day, according to Energy Minister Alexander Novak.

West Texas Intermediate for January delivery dropped 1.9 percent to $54.89 a barrel in New York. Brent crude for February settlement fell 1.3 percent to $59.24 a barrel in London.

Norway’s krone fell 1.4 percent to 7.5327 per dollar after the currency of western Europe’s biggest oil producer reached 7.8745 yesterday, the weakest level since 2002.

The MSCI All-Country World Index fell for an eighth day, its longest streak in more than two years. The gauge is extending its lowest level since Oct. 20, and financial companies led the decline. Energy stocks were the only ones rising today.

After a 1.7 percent jump yesterday, the Stoxx 600 resumed its drop, falling for a seventh day in eight as banks slid.

Philips, Volcano

Royal Philips NV lost 2.9 percent after agreeing to buy Volcano Corp. for $1 billion to boost its growth in image-guided treatments of the heart and blood vessels.

Hermes International SCA jumped 7.2 percent as LVMH Moet Hennessy Louis Vuitton SA is distributing a stake in the French maker of Birkin handbags to shareholders.

Futures on the S&P 500 expiring in March climbed, signaling the index will rebound after slumping 3.1 percent in the past three days. It closed at its lowest level since Oct. 27.

“When the members of the FOMC gather today for the last of the year’s meetings they will have to weigh up whether what they are seeing out there is the beginning of a real crisis or just a wobble,” said Anthony Peters, a broker at Swiss Investment Corp. in London.

The dollar strengthened against most of its major peers. It rose from its lowest level in four weeks against the Japanese currency, up 0.6 percent to 117.12 yen.

The drop in Treasuries pushed 10-year yields up three basis points, or 0.03 percentage point, to 2.09 percent. Rates on similar-maturity U.K. gilts rose two basis points to 1.79 percent and those on German bunds were little changed at 0.59 percent.

Ruble Weakens

After climbing as much as 7.8 percent, the ruble depreciated 1.5 percent against the dollar, extending a selloff that wiped out more than a fifth of its value. The finance ministry said in an e-mailed statement that the Russian currency was “extremely undervalued” after a surprise 650 basis-point interest rate increase failed to stem the worst rout among global peers this year.

The dollar-denominated RTS Index (RTSI$) added 4.9 percent after a 12 percent slump yesterday. The benchmark Micex Index slid 0.5 percent, taking its year-to-date retreat to 4.5 percent.

The cost of insuring against losses on Russian sovereign debt fell, snapping 17 days of increases. Credit-default swaps on the government bonds dropped 24 basis points to 556 basis points, signaling a 30 percent probability of default within five years.

Corporate Bonds

Bonds sold by OAO Gazprom, the world’s biggest natural-gas producer by output, dropped for a 14th day. The Moscow-based company’s 500 million euros of 4.364 percent securities fell 2.1 cents on the euro to a record 72 cents.

The MSCI Emerging Markets Index fell for a ninth day, down 0.2 percent. It’s heading for the lowest close since July 2013.

China’s benchmark stock index rose 1.3 percent to a four-year high on speculation the government will loosen monetary policy and ease capital requirements that may allow brokerages to boost margin lending.

The People’s Bank of China rolled over at least a portion of a three-month lending facility from September that was set to expire, a government official familiar with the matter said after the market close.

To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Cecile Vannucci in London at cvannucci1@bloomberg.net

To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net; Nick Gentle at ngentle2@bloomberg.net Stuart Wallace, Nick Gentle
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