European stocks bounce as dollar swings before Fed

Sydney - European stocks advanced, rebounding after three days of declines amid a series of market reversals.

Gold headed for the first drop in four days, while the dollar swung between gains and losses as investors tread water before Wednesday’s US interest rate decision.

Most industry sectors climbed as the Stoxx Europe 600 Index advanced, with banks leading the way. Emerging market equities fell, meanwhile, taking a breather after rising in 10 of the past 11 days.

As the greenback traded little changed the euro strengthened, flirting once again with its highest level in two years after German business confidence data beat expectations. Saudi Arabia’s promise to further cut crude exports spurred oil toward a second day of gains.

Markets this week are moving to the ebbs and flows of company- and industry-specific forces as investors brace for the Fed decision, when the central bank will weigh robust global growth against feeble inflation and mixed US economic data. Expectations are for policy makers to keep rates on hold; clues to the fate of its balance sheet will be key.

“Any major policy announcement is more likely when chair Janet Yellen faces the press following the September meeting,” J&E Davy  analyst David McNamara wrote in a note.

“For now the Fed remain on track for a couple more rate hikes at least this year, with most members believing the recent softness in inflation to be temporary.”

Here are some key events coming up this week:

• Post-Brexit trade talks between the UK and US are underway in Washington.

• Fed policy makers begin their meeting on Tuesday, with a decision due on Wednesday.

• Donald Trump’s son and former Trump campaign chairperson Paul Manafort will go before Senate committees on Wednesday.

• The US economy probably gained traction in the second quarter as spending by American consumers picked up after a lull early this year.

• The gross domestic product report follows the two-day Fed policy meeting.

• Results from Facebook, Deutsche Bank, Nomura, BNP Paribas SA and UBS are among those expected this week.

Here are the main moves in markets:

Asia

• The Australian dollar rose 0.1% after erasing an earlier decline.

• Attention turns to two key events on Wednesday: June quarterly inflation data and a speech on the labour market and monetary policy from Reserve Bank of Australia Governor Philip Lowe.

• Japan’s Topix index lost 0.3%.

• Australia’s S&P/ASX 200 Index added 0.7%.

• South Korea’s Kospi index retreated 0.5%.

• The Hang Seng Index was little changed while the Shanghai Composite Index slipped 0.2%.

Currencies

• The euro rose 0.1% to $1.1654 as of 10:35.

•  The Bloomberg Dollar Spot Index and British pound were both little changed, sterling at $1.3024.

• The Japanese yen dipped 0.2% to ¥111.28/$, the first retreat in more than a week.

Stocks

• The Stoxx Europe 600 Index added 0.5%.

• The MSCI All-Country World Index rose 0.1%.

• Germany’s DAX Index gained 0.6%, advancing for the first time in four days and the biggest rise in almost two weeks.

• The MSCI Emerging Market Index dropped 0.2%, the largest decrease in more than two weeks.

• Futures on the S&P 500 Index were little changed after the underlying gauge slipped 0.1%.

Commodities

• Gold fell 0.3% to $1 251.87 an ounce.

• West Texas Intermediate crude rose 0.5% to $46.55 a barrel.

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.27%.

• Germany’s 10-year yield increased one basis point to 0.52%.

• Britain’s 10-year yield added less than one basis point to 1.191%.

• France’s 10-year yield was little changed at 0.75%.

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