China deal sends shares to one-month high, rouble surges
A landmark deal to give global investors easier access to China’s $3.9 trillion stock market helped lift world shares to their highest in over a month on Monday, as renewed tensions in Libya and Ukraine pushed up oil prices.
Wall Street was also expected to edge higher when trading resumes, while the fireworks continued in Russia as tough talk from Vladimir Putin and a move by the central bank to abandon rules-based currency intervention sent the rouble soaring.
Chinese shares .CSI300 had jumped 2.5 percent and Hong Kong’s Hang Seng index .HSI climbed almost 1 percent overnight after the two announced a Nov. 17 start date for their long-awaited tie-up that will allow global investors to buy Chinese stocks from Hong Kong. European markets .FTEU3 also got the week off to positive start amid more M&A activity and encouraging results from brewer Carlsberg [.EU] pushing MSCI’s All-World index .MIWD00000PUS, which spans 45 countries, to its highest since late September.
“We have seen pretty strong recovery by stocks in the past few weeks after the dip last month but we aren’t really surprised,” said Sybren Brouwer, head of equity strategy at ABN Amro.
“We have the feeling the global economic recovery is still going on, and even though there is this gap (in pace of recovery) between the U.S. and Europe at the moment, we expect Europe will catch up.”
In the currency market, the high-flying dollar .DXY took a step back, however, with some traders still using mixed U.S. jobs numbers on Friday as an excuse to lock in some gains. The Swiss franc EURCHF= was also in focus as it nudged the Swiss National Bank’s 1.20 ceiling against the euro. [FRX/]
The SNB has successfully kept a lid on the franc’s gains since it introduced the cap in 2011 and says it has not had to intervene to reinforce it for more than two years.
But with a referendum on Nov. 30 that is aimed at preventing the SNB from offloading its gold holdings and obliging it to hold at least 20 percent of its assets in gold, speculators are targeting the cap, testing the SNB’s patience.
ROUBLE RALLY
Europe’s bond markets were feeling the benefit of Friday’s rally in U.S. government bonds US10YT=RR following the jobs data that showed although headline employment continued to improve, wage growth remained subdued.
German government bond yields touched their lowest in nearly a month and even Spanish ones dipped ES10YT=TWEB despite millions of Catalans voting over the weekend in a non-legally binding referendum on independence from the rest of Spain.
Oil prices rose on renewed political tensions in the Middle East and Ukraine, with Brent crude LCOc1 gaining 1.4 percent, extending its recovery from a four-year low hit last Wednesday.
Fierce fighting between Iraqi military forces and Islamic State insurgents, a dip in the dollar, the third Libyan oil field closure in a week and shelling in the pro-Russian stronghold of Donetsk in eastern Ukraine, all fed the move.
The dollar’s fall also lifted the battered gold price from 4 1/2-year lows to $1,167 per ounce XAU=, though it was not such good news for high-flying Japanese stocks .N225 as the yen’sJPY= rebound meant they lost 0.6 percent. [.N]
There was no sign that recent volatility in Russia’s rouble was about to let up either as, after dabbling with the idea last week, Russia’s central bank formally abolished structured currency market interventions.
It means it is likely to act more unpredictably, and probably forcefully, going forward. Shortly before the announcement, President Vladimir Putin had said there was no reason for the slide in the Russian currency.
After a dramatic fall in the previous week and volatile swings of 6 percent in its rate on Friday, the rouble was last up almost 3 percent at 45.32 to the dollar RUBUTSTN=MCX.
Source: Reuters – China deal sends shares to one-month high, rouble surges
