Europe Stocks Rise With Italy Bonds After ECB; Euro Drops 

euro markets

European stocks extended gains, Italian bonds advanced and corporate credit risk slid to a six-year low after the European Central Bank cut all three interest rates. The euro weakened, treasuries rose and commodities fell.

The Stoxx Europe 600 Index added 0.6 percent at 7:49 a.m. in New York. Standard & Poor’s 500 Index futures gained 0.1 percent, after the index closed at a record. The MSCI Emerging Markets Index rose 0.3 percent. The yield on Italy’s two-year note dropped six basis points to 0.69 percent. Corporate bond risk fell for a fifth day in Europe to the lowest since May 2008. The euro slid 0.3 percent to $1.6744. The S&P GSCI gauge of 24 commodities slid 0.1 percent with oil down 0.3 percent.

The ECB became the first major central bank to take rates negative today as President Mario Draghi seeks to ward off deflation. Underscoring the tension surrounding today’s ECB meeting, implied volatility on one-day options on the euro-dollar exchange rate surged to the highest level since February 2013. A U.S. report today will probably show initial jobless claims rose last week before monthly payrolls data tomorrow.

Average yields on bonds across the euro area fell to a record in the past month after Draghi said on May 8 that the central bank was “comfortable” taking measures to boost inflation.

Greece’s 10-year yield slid seven basis points to 6.31 percent and the rate U.S. Treasuries declined two basis points to 2.58 percent.

Bond Risk

The cost of insuring against losses on corporate debt dropped for a fifth day, with the Market iTraxx Europe index of credit-default swaps on 125 investment grade companies falling one basis point to 63.5 basis points, the lowest since May 2008.

The implied volatility on one-day options on the euro versus the dollar surged to as much as 22.1 percent, from 4.3 percent at the end of last week.

The Stoxx 600 closed at its highest level since January 2008 on June 2. Trading volumes for shares on the index were 15 percent lower than the 30-day average today, data compiled by Bloomberg show.

European Stocks

Smith & Nephew Plc gained 4.9 percent as people familiar with the matter said Medtronic Inc. is considering a takeover of the U.K. medical-device maker.

Asos Plc (ASC) tumbled 29 percent after the online fashion retailer cut its profit-margin forecast. Volvo AB slid 2.2 percent after UBS AG recommended selling shares of the world’s second-largest truckmaker.

S&P 500 futures advanced less than 0.1 percent today after the index rose 0.2 percent to an all-time high of 1,927.88 yesterday.

 

Source: bloomberg

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