Stocks Rise as Election Risks Fade; Pound Jumps on Brexit Ruling

(Bloomberg) -- A rally in European stocks ended their longest losing streak in two years as concern over the outcome of the U.S. presidential election faded, and the pound surged after a court ruled that the U.K. must hold a vote in Parliament before starting the two-year countdown to Brexit. British government bonds extended declines after the Bank of England said it no longer expects to cut interest rates this year.

The Stoxx Europe 600 Index was buoyed by Societe Generale SA and ING Groep NV. The yen trimmed gains, Mexico’s peso erased declines and Bloomberg’s dollar index pared losses as polls from the New York Times and ABC News showed Hillary Clinton ahead of Donald Trump. The U.K. pound touched a three-week high amid speculation that the court ruling could delay a secession, while the yield on 10-year gilts rose. Egyptian shares climbed to a five-month high after the central bank said it would allow its currency to float freely. Oil rebounded from its longest losing streak in two months.

European stocks stumbled to a four-month low on Wednesday amid mixed earnings reports, growing anxiety about the U.S. presidential race and lingering concern about the region’s economic recovery. Investors turned cautious over the past week as voter surveys suggested Clinton’s once dominant lead over Trump was faltering before the Nov. 8 election. Poll aggregator FiveThirtyEight gives the Democrat a 68 percent chance of victory, 14 percentage points less than it estimated prior to a Friday announcement that the FBI had reopened a probe into her use of an unauthorized e-mail server while Secretary of State.

“It’s a market consolidation and stabilization in the absence of any bad news -- we also had good news today from ING and Societe Generale,” said Barthelemy Debray, a fund manager at Paris-based Cogefi Gestion, which has assets under management of about 500 million euros ($555 million). “We will see more volatility until Tuesday’s U.S. presidential elections. I am not inclined to say that Hillary will win it yet.”

The U.K. must hold a vote in Parliament before starting the two-year countdown to Brexit, a panel of London judges decided, setting up a constitutional confrontation at the country’s Supreme Court.

Stocks

The Stoxx 600 gained 0.6 percent at 12:32 p.m. in London after falling for eight straight days. A gauge of volatility advanced for a ninth day, its longest streak since August 2011. The U.K. pound rose and the FTSE 100 slipped 0.5 percent after the court’s announcement.

Societe Generale and ING Groep led a gauge of banks to one of the biggest gains on the equity benchmark, climbing 4.3 percent or more on better-than-estimated earnings. Credit Suisse Group AG, which posted a surprise profit, lost 5.4 percent after its chief executive officer said the outlook remains “challenging.”

Among other stocks moving on earnings reports:

• Dufry AG jumped 4.4 percent, leading gains among retailers, after the Swiss operator of duty-free stores posted an acceleration in organic-sales growth.

• Vonovia SE added 2.7 percent, pacing real estate company progress, after the German residential landlord said it will pay a higher dividend as nine-month profit rose.

• Schroders Plc climbed 1.7 percent as Europe’s largest publicly-traded asset manager posted net inflows.

• Beiersdorf AG advanced 4.1 percent after the Nivea cream maker raised its margin outlook.

• French utility Veolia Environnement SA declined 5.8 percent after sales fell below its own expectations.

• Adidas AG lost 7.1 percent as its operating profit missed projections.

Futures on the S&P 500 Index rose 0.2 percent after the latest polls, indicating U.S. equities will halt their longest string of losses since November 2011. Facebook Inc. slid 5.7 percent in premarket New York trading following its earnings. The social network predicted an uptick in costs and a slowdown in advertising sales growth.

Asia ex-Japan stocks held near their lowest level since September after sliding 1.4 percent in the last session. The MSCI Emerging Markets Index fell for a third day, sliding 0.4 percent. Philippine equities declined for a ninth day in the longest losing streak since November 2015.

Currencies

Egypt’s benchmark EGX 30 Index climbed 3.4 percent and the pound’s 12-month non-deliverable forwards plunged more than 10 percent to a record 16.6758 per dollar.

The bank also raised its two benchmark overnight interest rates by 3 percentage points as part of measures to stabilize the economy. The action bring the nation closer to securing a $12 billion loan from the International Monetary Fund.

Mexico’s peso, a barometer of investor anxiety about the U.S. election, rose 0.1 percent, reversing losses of as much as 0.9 percent. The currency tends to fall when Trump’s election prospects improve because he has pledged to revisit the North American Free Trade Agreement that governs commerce between the U.S. and Mexico.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, fell 0.1 percent. The yen pared gains to 0.1 percent after reaching a one-month high, and South Korea’s won rebounded 0.7 percent from near to a three-month low. A JPMorgan Chase & Co. index of global currency volatility held at a seven-week high.

The pound climbed to a three-week high as a U.K. court ruled the government must hold a vote in Parliament before starting the two-year countdown to Brexit. Sterling rose for a fifth day against the dollar amid speculation that the ruling has boosted the possibility that the U.K.’s secession may be delayed or softened by the process.

Commodities

Gold declined 0.3 percent to $1,292.98 an ounce to end the longest run of gains since September. Silver dropped 1.7 percent.

Crude oil advanced 0.6 percent to $45.61 a barrel. It tumbled 2.9 percent in the last session as data showed U.S. inventories rose by 14.4 million barrels last week, the biggest gain in data going back to 1982 and more than the 2 million barrel increase forecast in a Bloomberg survey. Record OPEC output last month is also damping the outlook for oil, complicating the group’s effort to stabilize prices.

Bonds

Spanish and Italian bonds fell, paring an advance from Wednesday. The yield on Spanish 10-year bonds advanced two basis points to 1.22 percent, after dropping nine basis points the previous day. Yields on German 10-year bunds, the region’s benchmark securities, rose three basis points to 0.16 percent.

U.K. 10-year bonds fell, with the yield advancing six basis points to 1.22 percent, after the Bank of England said it no longer expects to cut interest rates again this year and that inflation risks could even warrant tightening at some point.

Bank of America Corp.’s MOVE Index, a gauge of price swings in Treasury options, climbed to 69.2 Wednesday, a level not seen since Sept. 13. The yield on U.S. Treasuries due in a decade climbed two basis points to 1.82 percent.

The cost of insuring corporate debt against default eased, ending seven days of gains. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies fell from the highest in almost four months, dropping one basis point to 75 basis points. A gauge of swaps on non-investment grade businesses declined two basis points to 336 basis points.

Federal Reserve policy makers left interest rates unchanged Wednesday, while saying the argument for higher borrowing costs strengthened further amid accelerating inflation, reinforcing expectations for a hike next month.

Data Thursday showed filings for U.S. unemployment benefits unexpectedly rose last week to the highest level in almost three months. Investors will also parse reports on factory and durable-goods orders, as well as services activity, for further indications of the economy’s ability to cope with higher interest rates.

--With assistance from Emma O'Brien Netty Ismail Jasmine Ng Neil Denslow Stephen Kirkland Andrew Reierson David Goodman Julie Edde and James Regan To contact the reporter on this story: Alan Soughley in Franklfurt at asoughley@bloomberg.net. To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.

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