Metals Rally on Chinese Support, Boosting Stocks; Lira Slides

(Bloomberg) -- Signs China is moving to prop up metals prices boosted aluminum to zinc, helping fuel a second day of gains in European equities. Canadian stocks rallied.

Copper jumped as much as 4.2 percent and aluminum rose the most since early October, pushing up mining shares on the Stoxx Europe 600 Index for the first time in five days. Automakers helped lead the gauge higher as the euro extended losses near a seven-month low. While emerging-market stocks climbed for the first time this week, the increase in metals prices failed to support currencies of commodity-producing nations.

China may intervene in the domestic metals industry to stop excessive short selling, with the largest copper and nickel suppliers planning to meet this week to weigh their response to the slump in prices, people with knowledge of the matter said. Concern over the slowdown in Asia’s largest economy as well as gluts in supply have weighed on base metals this year, helping send the Bloomberg Commodity Index to its lowest level since 1999. Financial markets in the U.S. were closed Thursday for the Thanksgiving holiday.

“We believe metals have bottomed out,” John Meyer, an analyst at SP Angel in London, said by phone. “We are optimistic for a restart of infrastructure projects in China and the benefits of fiscal improvements feeding through. We’re looking forward to some recovery next year.”

Commodities

Aluminum rose 2.8 percent to $1,501 a metric ton in London, its biggest advance since Oct. 9, while zinc gained 1.7 percent. Nickel climbed for a third day, gaining as much as 4.7 percent to $9,330 a metric ton as it rallied from near its lowest price in more than a decade. Copper, zinc and aluminum rose to their highest levels in at least a week.

The London Metal Exchange index of six industrial metals has lost 25 percent this year, headed for its worst annual slump since the global financial crisis. Goldman Sachs Group Inc. said this month that recent cuts to production weren’t large enough to rescue prices and a significant increase in Chinese demand was needed. China is the world’s biggest consumer of base metals.

West Texas Intermediate oil declined 1.2 percent to $42.51 a barrel by 4 p.m. in New York, paring its advance this week to 5.3 percent. While U.S. data Wednesday showed an increase in the nation’s oil stockpiles, a report from Baker Hughes Inc. indicated the number of active oil rigs fell to 555, the least in five years.

Stocks

Canada’s commodity producer-heavy Standard & Poor’s/TSX Composite Index increased 0.2 percent Thursday, led by healthcare and raw materials stocks. Copper miner First Quantum Minerals Ltd. advanced 6.4 percent and Teck Resources Ltd. increased 3.5 percent. Canadian Oil Sands Ltd. retreated 0.9 percent after Suncor Energy Inc. said it may scrap its $4.5 billion hostile bid for the company should regulators in the province of Alberta endorse a poison pill giving the target company more time to find other bidders.

The Stoxx Europe 600 Index added 0.9 percent, pushing it to the highest level since Aug. 18 after a 1.4 percent increase on Wednesday.

Glencore Plc climbed 5.9 percent in London, while Volkswagen AG added 3.5 percent in a 10th successive advance. The volume of Stoxx 600 shares changing hands was 29 percent below the 30-day average, according to data compiled by Bloomberg. The MSCI Asia Pacific Index rose 0.5 percent, after sinking Wednesday to its lowest level since Nov. 18.

Infineon Technologies AG jumped 13 percent after it reported better-than-expected operating income, spurring gains in peers such as Dialog Semiconductor Plc. Remy Cointreau SA slid 3 percent as its profit dropped more than analysts projected. BHP Billiton Ltd. slipped 2.4 percent in London after a United Nations probe into a deadly mine spill said steps that the company took to prevent harm weren’t sufficient.

Bang & Olufsen A/S, the Danish maker of high-end televisions and audio components whose stock has languished for seven years amid lackluster sales growth, said it received approaches about a possible takeover, sending its shares up a record 31 percent.

Standard & Poor’s 500 Index e-mini futures expiring in December gained 0.4 percent. Wednesday was the last full trading day in the U.S. as markets are closed Thursday and will shut at 1 p.m. on Friday. The benchmark stock measure hasn’t moved more than 0.2 percent over the past three trading days as investors mull the outlook for global monetary policy and the prospect of a U.S. interest-rate increase next month.

Emerging Markets

The MSCI Emerging Markets Index gained 0.2 percent, with benchmark gauges in South Korea and Taiwan climbing more than 1 percent as technology shares advanced.

The Borsa Istanbul 100 Index slid 2.4 percent as Turkey’s lira slipped 1.3 percent, extending losses spurred by the country’s downing of a Russian warplane near its border with Syria into a fourth day.

A new program from Turkey’s government omitted the word “independent” in reference to the central bank’s choice of monetary policy and tools for the first time since the ruling AK Party came to power in 2002. The government said the wording change in the program unveiled on Wednesday doesn’t reflect a curtailment of policy makers’ autonomy.

Turkish President Recep Tayyip Erdogan also denied Russian President Vladimir Putin’s allegations that Islamic State gets cash by selling oil to Turkey. Tension between the two nations are mounting with Russia beginning trade retaliation the downing of the plane.

In Brazil, swap rates rose the most in seven weeks on speculation the central bank is signaling it’s preparing to resume rate increases to stem inflation.

Rates on the contract maturing in January 2017 jumped 0.27 percentage point to 15.54 percent, the steepest climb in a single day since Oct. 9. The real was little changed at 3.7435 per dollar.

Brazil’s central bank held key rates at a nine-year high of 14.25 percent for the third straight meeting Wednesday, in line with the forecasts of all but one of 50 economists surveyed by Bloomberg. In the first divided decision since October 2014, two members of the eight-person board voted to raise borrowing costs to 14.75 percent. Policy makers removed language used in the past three communiques about keeping rates unchanged for a prolonged period.

Brazilian stocks rebounded from the market’s biggest decline in six weeks, adding 0.6 percent.

Currencies

A gauge of 20 emerging-market currencies fell for a second day, with South Africa’s rand dropping 1.1 percent and the Indian rupee down 0.4 percent.

The Australian dollar weakened a second day, slipping 0.3 percent to 72.27 U.S. cents. The government reported a 9.2 percent drop in third-quarter business investment Thursday, the steepest in data going back to 1989, according to calculations by Bloomberg. The central bank has cut key rates to a record 2 percent in its bid to ignite an economy hobbled by a slowdown in China.

The euro fell 0.2 percent to $1.0608 after touching its weakest level in seven months Wednesday amid mounting speculation the European Central Bank will boost stimulus measures at its meeting Dec. 3.

“We expect the ECB will cut the deposit rate by more than the market expects next week,” said Mansoor Mohi-uddin, senior markets strategist at Royal Bank of Scotland Group Plc in Singapore. “This should keep the euro a sell on rallies into the meeting and allow the euro to test $1.05 if the ECB meets our expectations.”

Credit

The cost of insuring investment-grade corporate debt fell to the lowest level in more than three weeks on a closing basis. The Markit iTraxx Europe Index of credit-default swaps was little changed at 70 basis points. An index of default swaps on junk-rated companies retreated.

Abengoa SA invited noteholders to form a committee so they can start debt negotiations. The Spanish renewable-energy company on Wednesday said it was seeking preliminary protection from creditors. Its 500 million euros of bonds due in March were quoted at 22 cents on the euro after plunging 42 cents on Wednesday, according to data compiled by Bloomberg.

The International Swaps & Derivatives Association on Thursday ruled that a bankruptcy credit event hadn’t taken place at Abengoa. A ruling by the Determinations Committee that an event had occurred would pave the way for payments on credit- default swaps.

(An earlier version of this story was corrected to amend the date of the MSCI Asia Pacific Index’s low.)

--With assistance from Agnieszka de Sousa, Andrew Reierson, Cecile Vannucci, Neil Denslow, Stephen Kirkland, Emma O'Brien, Sebastian Boyd, Nao Sano and Netty Ismail.

To contact the reporters on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; Eric Lam in Toronto at elam87@bloomberg.net To contact the editors responsible for this story: Emma O'Brien at eobrien6@bloomberg.net; Paul Dobson at pdobson2@bloomberg.net Kenneth Pringle