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Global stock rout eases amid oil advance

Wellington - Global equities showed signs of respite after a turbulent week with European stocks advancing and oil rising from a 12-year low. German bonds fell with Treasuries.

The Stoxx Europe 600 Index rallied from its lowest close since September 2013 following a selloff that sent global equities into a bear market. Commerzbank AG led financial institutions higher after saying it returned to profit, while miners and energy producers rose with commodities.

The yield on 10-year Treasuries rose after reaching the lowest since 2012 on Thursday. In Asian trading, Japanese stocks capped their worst week since 2008 and currencies from New Zealand to Thailand slumped.

Equity markets rebounded after a torrid week when investors questioned whether central banks have the tools to shore up the global economy. Federal Reserve Chair Janet Yellenin a second day of testimony said the Fed was assessing the impact of the swings in the markets on the economy but she doubted that would prompt it to reverse course and cut rates. Investors will be watching US data on retail sales and consumer confidence to gauge how America is weathering the global slowdown.

“I’d be weary of calling anything a lasting rebound until I see it,” said Ben Kumar, an investment manager at Seven Investment Management in London. His firm oversees about $13bn. “It’s crazy that the market is priced for recession and a complete failure of the financial system. But you wouldn’t want to call it the end of the rout quite yet. Nobody wants to be the first bull now.”

Stocks

The Stoxx Europe 600 Index rose 1.7% at 6 a.m. in New York, paring its weekly drop to 5.2%. Miners led the Friday’s advance, with Rio Tinto Group and Glencore Plc contributing the most as prices for base metals rose.

A gauge of lenders posted the second-best performance of the 19 industry groups on the Stoxx 600, with Commerzbank AG surging 17% after saying it returned to profit, easing concerns that banks will fail to find a way to remain profitable in a low-rate environment. The region’s lenders plunged the most since August 2011 on Thursday. Total SA and Royal Dutch Shell led the climb with gains of more than 3.5%.

Contracts on the Standard & Poor’s 500 Index expiring in March advanced 0.7%, indicating equities will rebound from Thursday’s selloff. American International Group added 2% in European trading after lifting its dividend and announcing a $5bn share buyback, even as it posted a second-straight quarterly loss.

Reports will probably show US retail sales were little changed in January, while a measure of consumer sentiment improved in February, according to economist forecasts compiled by Bloomberg.

In Asia, the Topix index slumped 5.4% in Tokyo as traders returned from holiday, leaving it down lost 12.6% on the week, the biggest loss for the period since the global financial crisis.

Emerging markets

The MSCI Emerging Markets Index fell 0.3%, extending this week’s decline to 3.9%, the steepest loss since January 15. The index has dropped 11% this year and is valued at 10.7 times estimated 12-month earnings, compared with 15 for the MSCI World Index of developed markets, which dropped 12% in 2016.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong declined 2%, after sliding 4.9% when trading resumed on Thursday. Markets in mainland China, Taiwan and Vietnam are set to reopen on Monday after the Lunar New Year holiday.

The offshore yuan dropped 0.08% in Hong Kong ahead of the reopening of onshore trade on Monday, ending three days of gains, according to China Foreign Exchange Trade System prices. The currency is headed for a 0.5% advance for the week. Investors are watching out for what the People’s Bank of China will do with the yuan’s reference rate when mainland markets reopen.

South Korea’s Kospi lost 1.3% on Friday to the lowest close since August, while South Africa’s benchmark jumped 1.9% and Russia’s Micex Index rose 0.5%.
Commodities

Oil rebounded from the lowest level in more than 12 years amid speculation that oil producers could cooperate to reduce the surplus. West Texas Intermediate gained 5.1 percent to $27.55 a barrel, paring a weekly drop of 11%. Brent added 5.3% to $31.67.  
 
The CBOE Crude Oil Volatility Index, which measures expectations of price swings, climbed to the highest level in seven years Thursday. Producers are ready to work together and suppliers won’t make cuts unless there is complete cooperation, United Arab Emirates Oil Minister Suhail Al Mazrouei said on a Sky News Arabia report posted online February 10.
 
Industrial metals also advanced. Nickel climbed 1.1% to $7,675 a metric ton, rebounding from a 13-year low. Copper rose 1% and aluminum added 0.6 percent. Gold headed for its biggest weekly gain in four years as investors sought out havens. The metal fell 0.7% to $1,237.84 an ounce after surging on Thursday to its highest level in a year. Silver dropped 0.7%.

Currencies

The euro declined the most in a week against the dollar, falling 0.3% to $1.1287. Europe’s common currency slid for a third day against the yen, dropping 0.1% to 127.12. The yen was little changed at 112.45, set for its biggest two- week gain versus the dollar since 1998, sparking speculation that authorities will intervene to weaken it.

New Zealand’s dollar lost 0.7%. The Thai baht slid 0.9%, the most since October and the South Korean won fell 0.7%.

An index of 20 developing-nation currencies declined less than 0.1% on Friday, taking its drop this week to 0.6%, the most since January 15. The gauge is down 1.4% this year and reached a record low in January.

Bonds

Germany’s 10-year bund yield rose two basis points to 0.21%, having slid on Thursday to its lowest since April on investor demand for havens. Treasury 10-year yields rose two basis points, to 1.69%. Italy’s 10-year bond yield fell three basis points to 1.69% and Spain’s was little changed at 1.78%, still up from 1.64% on February 5.

The cost of insuring corporate debt fell from the highest since 2013. The Markit iTraxx Europe Index of credit-default swaps on investment-grade corporate debt fell two basis points to 122 basis points. A measure of swaps on junk-rated companies dropped eight basis points to 476 basis points. Indexes of swaps tied to financial companies’ senior and junior debt declined.

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