Euro Gains on Fed as China Shares Rise; Oil Retreats

by Emma O'BrienNick Gentle

(Bloomberg) -- The euro strengthened, leading gains against the dollar on speculation that weaker U.S. economic data mean the Federal Reserve won’t rush to raise interest rates. Oil retreated, while Chinese shares closed at a six-year high.
The euro strengthened 0.3 percent to $1.0596 by 8:19 a.m. in London, pushing the Bloomberg Dollar Spot Index lower for a second day. The Stoxx Europe 600 index was little changed after its highest close since June 2007, with Germany’s Dax Index near a record. The Shanghai Composite Index added 1.6 percent on surging volume. Standard & Poor’s 500 Index futures were little changed. China’s yuan jumped the most in a month in offshore trade. U.S. oil traded at $43.39 a barrel for a sixth straight loss.
The Fed begins a two-day meeting today with a Bloomberg measure of economic surprises at its lowest since 2009 after gauges of producer prices, factory output and consumer sentiment unexpectedly fell. The Bank of Japan kept its record stimulus in place as inflation stalls amid plunging energy prices. Indonesia held rates, in line with estimates after a surprise cut in
February, while the euro area updates on consumer prices.

“Investors got back into their everything-bad-is-good groove” after the factory reports and below-forecast data on housing, Tony Farnham, an analyst in Sydney at Patersons Securities Ltd., wrote in an e-mail to clients. “There is still a general expectation that the Fed will remove the word ‘patient’ from its April rates decision commentary. This would deliver the Fed increased flexibility on the rates front, something that those investors desiring never-ending sugar fixes dread.”

Shanghai Shares

The Bloomberg ECO U.S. Surprise Index, which measures whether data beat or missed forecasts, dropped to the lowest level since 2009. The 0.2 percent decrease in factory output followed a revised 0.3 percent drop in January, according to Federal Reserve figures issued Monday in Washington. Another report showed homebuilder confidence edged down in March.
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, slipped 0.5 percent Monday from a decade high. The euro fell 5.6 percent this month through yesterday as the Fed’s contemplation of interest-rate increases contrasts with the European Central Bank’s negative deposit rates and one-week-old quantitative easing program.
Russia’s ruble climbed 0.8 percent to 61.7 per dollar and Malaysia’s ringgit appreciated for the fourth time in five days, rising to 3.6947 per dollar.

Stimulus Held

The yen traded at 121.43 a dollar, little changed after the BOJ maintained a pledge to expand the monetary base at an annual pace of 80 trillion yen ($660 billion), as forecast by all 34 economists in a Bloomberg News survey.
The central bank said that the year-on-year change in consumer prices will be about zero percent for the time being due to the decline in energy costs. The yen has posted moves of less than 0.2 percent on each of the past three trading days.
The Indonesian rupiah gained 0.5 percent to 13,172 per dollar. Of 17 economists surveyed by Bloomberg, two -- Moody’s Analytics Inc. and Standard Chartered Plc -- predicted a 25 basis-point cut to 7.25 percent. The Bank of Korea unexpectedly reduced key borrowing costs last week, along with the Thai central bank.
About the same number of stocks rose as fell on the Stoxx 600 today, with 14 of 19 industry groups advancing. At 400.13, the gauge is within one point of its highest close since 2000.

China Shares

The Shanghai Composite advanced to 3,502.85, the highest close since May 21, 2008, on volume that was almost twice the 30-day average. The gauge rose 72 percent in the 12 months through yesterday, recovering from a retreat since August 2009 that had wiped out more value than any other equity market worldwide.
China’s one-year rate swap slid eight basis points to 3.68 percent after the central bank cut the yield on seven-day reverse repos in a further sign of monetary easing. The yuan rose 0.34 percent to 6.2544 per dollar in offshore trading, narrowing its discount to the onshore rate to a one-month low.
Hong Kong’s Hang Seng Index swung to a 0.2 percent loss and the Hang Seng China Enterprises Index rose 0.2 percent. Credit Suisse Group AG cut its outlook for Hong Kong’s economy amid a slowdown in spending by mainland tourists. The Kospi index in Seoul increased 2.1 percent, the biggest gain in eight months. Australia’s S&P/ASX 200 Index climbed 0.8 percent.
West Texas Intermediate crude slid 1.1 percent after plunging 12 percent over the past five days. Brent crude retreated 0.6 percent to $53.64 a barrel after three days of declines.
U.S. crude inventories have been increasing at their highest level since at least 1982, according to data from the Energy Information Administration, reigniting concern over a global glut in the commodity that sparked last year’s 46 percent slide in WTI. Oil stockpiles in Cushing, Oklahoma, the delivery point for New York futures, have reached about 70 percent of working storage capacity. The International Energy Agency has also raised its forecasts for U.S. production.
Wheat futures for May delivery rose 0.4 percent after surging 2.4 percent on Monday.