U.S.

Stocks Flucuate as ECB Stimulus Boosts Bonds, Weakens Euro

U.S. stocks fluctuated after briefly erasing an earlier rally, as investors shifted focus to Friday s jobs report. A shot in the arm for European stimulus boosted equities and bonds in that region. Equities struggled for direction in afternoon trading as attention turned to how tomorrow s payrolls data will influence the timing and pace of Federal Reserve interest-rate increases. European stocks surged with government debt after President Mario Draghi said the European Central Bank is expanding the scope of monetary stimulus as it sees signs of a slowdown in the region s growth.

There s going to be caution not only going into the jobs report but into the long weekend, said Tim Ghriskey, who helps oversee $1.5 billion including developing-nation stocks as managing director and chief investment officer at Solaris Asset Management. Draghi threw a degree if caution on the markets, but now people are waiting for tomorrow, absolutely.

The payrolls report on Friday represents the last major data point before the Fed meets to discuss the first increase in interest rates in nearly a decade.
U.S. data today showed jobless claims rose more than forecast last week, while a measure of the services industry hovered just below a 10-year high. Futures traders are betting the Fed will push back raising its fed funds rate. The probability of an increase in September has fallen to 28 percent, from 38 percent at the end of last week, according to data compiled by Bloomberg. The figures are based on the assumption that the benchmark will average 0.375 percent after the first rise.

We re setting up for tomorrow and I find myself wondering at this point what s good for the market, said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management Inc., which oversees $351 billion. Is it better to have a good report or a bad
report?

It s confusing as to whether good news is good news anymore on Wall Street. Draghi acknowledged a somewhat weaker economic recovery in the region,
and said the emerging-market rout sparked by China s shock devaluation of its currency threatened global expansion. The specter of the Fed raising interest rates as soon as at its Sept.

16-17 meeting, even as global growth slows, has added to investor anxiety.

Stocks

The Standard & Poor s 500 Index climbed 0.4 percent at 2:48 p.m. in New York, after briefly erasing most of a rally of more than 1 percent. The gauge surged 1.8 percent Wednesday after tumbling 3 percent the day before, when it notched its third-worst drop of 2015. It remains about 6 percent below its level on the day China cut its currency.

Robotic selling by quantitative investment funds tuned to volatility and price trends contributed to last month s losses in U.S. stocks and is only about halfway completed, according to a JPMorgan Chase & Co. strategist. Marko Kolanovic said such traders probably have to get rid of another $100 billion in stocks in the next one to three weeks. On Aug.

27, Kolanovic warned in a similar note that price insensitive program traders are likely to cause repeated selloffs. The Stoxx Europe 600 Index rallied 2.4 percent, as investors seeking assurances of central-bank support after the China-fueled volatility were not disappointed.

A gauge of services and manufacturing in the euro area climbed to a four-year high in August, a Markit report earlier today showed. With Chinese exchanges closed for a holiday, investors are also getting a respite from market moves there. Global equity volatility climbed to its highest level since 2011 earlier in the week, as signs China s economy may be headed for a steeper slowdown than the government forecast fueled anxiety over the global outlook. While losses in the Shanghai Composite Index have been mitigated by regulators before this week s holiday, the gauge s movements have held sway over sentiment toward equities around the world.

(For more news on stocks, see TOP STK.)

Emerging Markets

The MSCI Emerging Markets Index advanced for the first time this week, rising 0.6 percent, as benchmark gauges in Egypt, India, Hungary, Poland, South Africa and Dubai gained more than 1 percent.

One modest positive today is the fact China is offline for its Victory Day commemorations, said Chris Weston, Melbourne-based chief markets strategist at IG Ltd. So traders and investors will be focused on domestic data, valuations and trying to understand how to navigate these crazy markets.

Two shares rose for every one that fell in the MSCI index, which has dropped more than 9 percent since China devalued the yuan on Aug.

11. Chinese markets are shut to commemorate the end of World War II. South Africa s rand, South Korea s won and Malaysia s ringgit all weakened at least 0.8 percent, leading declines in developing-nation currencies.

(For more news on emerging markets, see TOP EM.)

Currencies

The euro slid 1.1 percent to $1.1109 and the yen was at 120.11 per dollar. Britain s pound fell for an eighth day against the dollar, its longest stretch of declines in almost a year, as a report showed growth in U.K. services unexpectedly slowed in August. Australia s dollar weakened toward a six-year low after retail sales unexpectedly fell.

Sweden s krona strengthened after the Riksbank kept its repo rate at minus 0.35 percent and said existing policies were supporting the continued positive development of the Swedish economy. It also said it was ready to expand monetary stimulus if needed.

(For more news on currencies, see TOP FX.)

Bonds

Benchmark 10-year Treasury note yields fell two basis points to 2.16 percent. German 10-year bunds climbed for a third day while the yield on similar-maturity Italian debt dropped the most in more than two weeks. The 25-member Governing Council kept the main refinancing rate at 0.05 percent as predicted by all 47 economists in a Bloomberg News survey. The deposit rate and the marginal lending rate stayed at minus 0.2 percent, and 0.3 percent, respectively.

(For more news on bonds, see TOP BON.)

Commodities

The Bloomberg Commodity Index rose 0.7 percent, advancing for a second day. Copper climbed 1.8 percent, while zinc added 0.4 percent. Nickel and aluminum also gained at least 1 percent. West Texas Intermediate crude climbed 2.1 percent to $47.22 a barrel in New York, after falling as much as 1.3 percent.

Brent oil rose 1.1 percent to $51.19 in London. Gold for immediate delivery fell 1 percent to $1,123.29 an ounce. The metal lost 0.6 percent on Wednesday, the first decrease in four days.

(For more news on commodities, see TOP CMD.)

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