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Euro rises with Stoxx 600 on ECB bank tests as China stocks drop

27 October 2014 14:00 (UTC+04:00)
Euro rises with Stoxx 600 on ECB bank tests as China stocks drop

By Bloomberg

European equities climbed with the euro and Spanish bonds as the region's central bank said most lenders passed stress tests. Chinese stocks retreated amid delays to a link between Hong Kong and Shanghai, while Brazilian assets tumbled after a presidential election.

The Stoxx Europe 600 Index added 0.6 percent as of 8:18 a.m. in London, while the euro strengthened 0.2 percent. The Hang Seng Index dropped 0.7 percent, after the local bourse's chief executive officer said he doesn't know when mutual access with Shanghai will begin. An exchange-traded fund of Brazilian shares plunged 6.8 percent in Tokyo and Petroleo Brasileiro SA shares tumbled 5.8 percent in Frankfurt after President Dilma Rousseff won re-election. Wheat and soybean futures fell.

European bank shares rallied after the ECB found that none of the region's largest banks lacked the ability to withstand times of economic stress. Charles Li, the chief executive officer of the Hong Kong bourse operator said yesterday he has no idea when authorities will give the green light for cross- border trading. Rousseff's victory over an opponent viewed as more friendly to investors stretches her Workers' Party's rule to a record 16 years.

"Most people expect markets to grind out some further gains," Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd. that oversees about A$1.6 billion ($1.4 billion), said by phone. "The authorities in Europe have chucked so much at the problem and will continue to flood the market with liquidity. The major issue of Europe of the past few years is old news now."

Biggest Banks

Lenders led gains among the 19 industry groups on the Stoxx 600. Deutsche Bank AG climbed 2.8 percent and Commerzbank AG surged 6.8 percent. Madrid-based Banco Popular Espanol SA advanced 3.7 percent. Standard & Poor's 500 Index futures advanced 0.2 percent after the U.S. gauge surged 4.1 percent last week. Austria's Erste Group Bank AG jumped.

nders in its assessment of the quality of bank balance sheets and their ability to withstand times of economic stress. No French, German or Spanish institutions were required to raise more capital.

The euro advanced to $1.2691 per dollar before business outlook surveys from Germany's IFO Institute today. Norway's krone and Sweden's krona advanced at least 0.2 percent. The Bloomberg Dollar Spot Index retreated 0.1 percent as the yen climbed 0.2 percent to 107.96 to the greenback. Spanish, Italian and Portuguese bond yields fell by at least four basis points.

"The results of the stress tests have already relieved some concerns," Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services, said by e-mail. "If the Ifo survey comes in as the market expects, worries about Germany will be scaled back, and the euro will rise."

Hong Kong

A gauge of Chinese shares in Hong Kong dropped 0.8 percent and the Shanghai Composite Index slid 0.5 percent. Hong Kong Exchanges & Clearing Ltd., the city's bourse operator, tumbled 4.7 percent, its biggest loss in six months.

Investors who had piled into Shanghai shares anticipating price discounts versus Hong Kong would narrow as the link began are now retreating from those bets at the fastest pace since March. China's economic growth will slow to 7.3 percent in 2015, Song Guoqing, an academic member of the PBOC's monetary policy advisory committee, said at a forum in Beijing on Oct. 25.

Brent crude fluctuated while West Texas Intermediate oil swung between gains and losses.

Brazil ETF

The average price of regular gasoline at U.S. pumps slid to the lowest level in almost four years, dropping 18.18 cents in the two weeks ended Oct. 24 to $3.0759 a gallon, according to Lundberg Survey Inc.

Volume on the Tokyo-traded Next Funds Ibovespa Linked ETF was more than 12 times its three-month full-day average. Rousseff, who has maintained record-low unemployment even as the economy posted the slowest growth under any Brazilian president in more than two decades, had 51 percent of the vote with 98 percent of ballots counted by the electoral court in Brasilia.

Senator Aecio Neves, a former governor of Minas Gerais state, had 49 percent. Folha owns polling company Datafolha, which predicted the result based on 95 percent of the ballots counted.

Grains retreated for a second day. Wheat for December delivery retreated 0.9 percent to $5.13 a bushel and soybeans dropped 0.4 percent to $9.7975. Corn weakened 1.1 percent to $3.495.

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